The world-beating rally in Chinese stocks is driving record inflows into exchange-traded funds that buy the nation’s stocks, with investors plowing billions across five leading funds amid optimism from Beijing’s stimulus measures.
Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $5.96 billion in the week ended Oct. 4 — the biggest weekly inflow in over a year. Five leading ETFs that invest in Chinese stocks received about $4.9 billion in cash, the most on record.
The iShares China Large-Cap ETF saw the biggest inflow, totaling $3.5 billion last week alone, while the KraneShares CSI China Internet Fund received over $1.4 billion — all hitting records as investors return in waves to the Chinese equity market. Other funds that also saw inflows were Direxion Daily FTSE China Bull 3X Shares and iShares MSCI China ETF, of $801 million and $340 million, respectively.
“The challenge to reignite growth in the Chinese economy, which means energising the consumer, is a very difficult one,” said Hasnain Malik, a strategist at Tellimer in Dubai. “But that may not prevent an equity market rally persisting, given the starting point of cheap valuation and sceptical consensus expectations.”
Chinese shares have skyrocketed as a string of economic, financial and market-support measures reinvigorated investor confidence over the world’s second largest economy. The wave of stimulus over the past few weeks have led the Hang Seng China Enterprises Index, which comprises Chinese stocks listed in Hong Kong, to jump more than 35% over the past month, making it the best performer among more than 90 global equity gauges.
Stimulus announced by Beijing has included interest-rate cuts, freeing-up of cash at banks, billions of dollars of liquidity support for stocks, and a vow to end the long-term slide in property prices. Now, all eyes will turn to Tuesday as Chinese markets are expected to reopen after a week-long holiday in what’s expected to be a frantic trading session.
On that same day, the China National Development and Reform Commission will host a press conference Tuesday to discuss implementation of a package of incremental economic policies. This new package of measures may give China’s equity market another boost, according to Malik.
