China ETFs bounced back last week on hopes of policy stimulus, both fiscal and monetary. Global hedge funds scooped up Chinese equities following the latest politburo meeting. Buying was at the fastest pace since October 2022, Goldman Sachs said in a report, as quoted on CNA.
The higher inflows were led by mainland A-shares and then Hong Kong-listed shares. The meeting clearly indicated support for capital markets and signaled the introduction of bigger easing measures to shore up the economy.
Easing Restriction in the Troubled Real Estate Sector
China’s housing ministry has announced plans to make it easier for people to buy property. These include easing purchase restrictions for people willing to buy a second house, and reducing down payment ratios for first-time homebuyers, according to an article on the Ministry of Housing and Urban-Rural Development’s website, quoted on CNBC.
“It seems to us that [the housing ministry] is quick in response this time and also gets bolder on relaxing property policies,” Jizhou Dong, China property research analyst at Nomura, said in a note Friday, the CNBC article indicated.
Cheaper Valuation
Global investors shifted away from China over the past few months, worried about the slower-than-expected, post-pandemic economic recovery and renewed Sino-U.S. tensions. Goldman Sachs said hedge funds' exposure to Chinese equities remained at around the low levels last seen in November 2022 and well below five-year averages, quoted on channelnewsasia.
This backdrop made China ETFs cheaper. Sentiment, however, started to improve in July. Net foreign buying in mainland Chinese equities marked their best month since April, official data showed. There is a reason behind the development too.
China cut key interest rate in 10 months amid post-Covid recovery slowdown in June, which boosted the markets in July. The People’s Bank of China lowered the rate on one-year medium-term lending facility (MLF) loans, totaling 237 billion Chinese yuan ($33 billion), by 10 basis points. The step took the rate at 2.65% compared to the previous 2.75%.
ETFs in Focus
Against this backdrop, below we highlight a few China ETFs that have a lower P/E ratio than the S&P 500 (P/E: 17.86X).
Global X MSCI China Financials ETF CHIX – P/E: 4.58X; Up 4.3% Last Week
Global X MSCI China Real Estate ETF CHIR – P/E: 6.75X; Up 6.9% Last Week
iShares MSCI China Small-Cap ETF ECNS – P/E: 6.76X; Up 3% Last Week
Matthews China Active ETF MCH – P/E: 14.80X; Up 4.2% Last Week
Global X MSCI China Consumer Discretionary ETF CHIQ – P/E: 16.58X; Up 5.8% Last Week
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Get it free >>Global X MSCI China Consumer Discretionary ETF (CHIQ): ETF Research Reports
iShares MSCI China Small-Cap ETF (ECNS): ETF Research Reports
Global X MSCI China Financials ETF (CHIX): ETF Research Reports
Global X MSCI China Real Estate ETF (CHIR): ETF Research Reports
Matthews China Active ETF (MCH): ETF Research Reports
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