China ETFs Jump On Government Support Vow

China-focused ETFs have soared by nearly 30% in intraday trading after China’s government signaled ongoing monetary support for its economy. 

The state-run news agency Xinhua reported comments from Vice Premier Liu He suggestingthe country would take “concrete actions” to bolster the economy through the first quarter.  

The report did not include any mention of inflation, which has created headaches for the Federal Reserve and other Western central banks as the world transitions out of the pandemic phase of COVID-19 and into supply chain shocks driving up prices. 

He was also quoted as saying Chinese regulators are in contact with U.S. counterparts over auditing U.S.-listed Chinese firms. The SEC last week issued for the first time a list of five U.S.-listed Chinese companies deemed in violation of a 2020 law requiring foreign companies to follow American audit rules or face delisting. 

China’s laws currently ban companies in the country from opening their books fully to foreign auditors, meaning every Chinese company trading on the U.S. markets through American depositary receipts (ADRs) could be delisted in the next several years. 

That promise sent the Hang Seng Index to a 9% gain in its Wednesday session, in turn pulling Chinese ADRs in U.S.-listed ETFs higher. 

The $5.1 billion iShares MSCI China ETF (MCHI) and the iShares China Large-Cap ETF (FXI) closed Wednesday's session with a respective 21.24% and 20.94% gain, while the cult favorite KraneShares CSI China Internet ETF (KWEB) added nearly 40%. Those figures held even after the U.S. Federal Reserve said it would raise the federal funds target rate to at least 0.25%. 

However, the three funds are still far in the red over the past 12 months due to the Chinese government’s ongoing COVID-19-related lockdowns, its crackdown on several key industries last fall, and its close-knit relationship with Russia at a time when most of the world is trying to punish Russian President Vladimir Putin for his invasion of Ukraine. 

Contact Dan Mika at [email protected], and follow him on Twitter ​