China ETF Outflows Persist Despite Rally

August 24, 2017

The largest Chinese equity ETFs are delivering a solid performance this year. But no one seems to be buying into it.

On the contrary, investor interest in the ongoing rally fueling these ETFs higher is muted at best, with some of these funds facing net redemptions—not creations—so far in 2017. So much for performance chasing.

Consider the three largest China equity ETFs by assets:

The worst performing of the bunch is up a healthy 25%, while the best performing has rallied 41% year-to-date. Compare these returns to the SPDR S&P 500 ETF Trust (SPY), which is up 10% this year. 

 

 

FXI, the largest China ETF investing in the country’s large-cap segment, with $3.3 billion in total assets, has seen net outflows of some $150 million year-to-date even as it rallied 25%.

MCHI, the second largest, with $2.6 billion in AUM, has now bled $286 million this year. GXC, at No. 3, with almost $1 billion in total assets, has seen $50 million in net outflows.

Why that has occurred is puzzling many.

It could be all about aversion to single-country risk for a country that’s known for political and economic risk. It could also be simply about profit-taking after a solid run. And it could be about smaller ETFs taking market share from the big three.

 

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