China Funds Lead ETFs Higher

November 30, 2022

China-focused ETFs led the exchange-traded funds market higher Wednesday, as the government’s plans to dismantle strict “zero COVID” policies eased concerns about the country’s growth. 

The top five movers were all China-centric funds, and three were KraneShares funds, according to Yahoo Finance. The KraneShares MSCI China Clean Technology ETF (KGRN) gained 7.85%; the Global X MSCI China Consumer Staples ETF (CHIS), added 5.82% and the KraneShares Electric Vehicles and Future Mobility Index ETF (KARS) rose 6.3% jump. BlackRock’s iShares MSCI China ETF (MCHI)—which is the largest China ETF, with over $6.8 billion in assets—rose 4.65%. 

Chinese authorities began making small amendments to its COVID policy earlier this week. On Monday, Beijing’s city government announced it would no longer set up barricades to restrict access to apartment buildings where people had tested positive.  

On Wednesday, the cities of Guangzhou and Chongqing also eased some of their policies regarding quarantine. China’s National Health Commission said it would expedite COVID-19 vaccinations and booster shots for citizens in the age group of 80 years or older. 

“I think the market is forward-looking as China moves away from its zero COVID policies,” KraneShares Chief Investment Officer Brendan Ahern told ETF.com. “Come the first or second quarter, I expect China’s economy to respond to these policy changes in a pretty strong way.” 

Despite the easings, President Xi Jinping’s government has yet to directly address the nationwide protests that erupted throughout the country over the weekend, which were the largest displays of public dissent in three decades.  

The country’s “zero COVID” policy is taking a toll on the Chinese economy. The World Bank recently said it expects growth to slow to 2.8% this year from 8.1% in 2021.  

The social unrest and instability has led some companies to reevaluate or change their business operations in the country. In September, Apple announced it would relocate part of its assembly and manufacturing hubs to India and Vietnam, slowly reducing its dependency on China. 

China ETFs play a large role in investors’ portfolios. According to ETF.com data, there are 58 China-focused ETFs being traded on U.S. markets, collectively harboring $23.48 billion of assets under management. 

 

Contact Zoya Mirza at [email protected] 

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