FOMO is the term used by young people to talk about the phobia of being left out (fear of missing something). For those who still don’t understand it, just take a look at the Chinese stock market. Since the country’s authorities announced a recovery plan to revive your financial markethe silver returns strongly to the Asian country’s market. However, investors are choosing exchange-traded funds (ETFs) over other options to take advantage of China’s stock market rebound that leaves active management on the verge of losing its throne.
Money invested through exchange-traded funds focused on Chinese stocks reaches 2.8 trillion yuan ($0.4 trillion at exchange rate), compared with 3.3 trillion in actively managed funds, data shows by Morningstar. In other words, the investors prefer this type of product since the fall of the main Chinese indices to lows not seen since 2019 and with the new momentum gained by the Chinese stock market. That contrasts with the rise in the country’s major stock indexes in 2021, where funds overseen by a manager who seeks market-beating returns have quintupled in size compared to ETFs.
The evolution of the Chinese stock market in 2024 will not come close to what was observed during the recovery from the pandemic. THE fragile situation of the Asian economy and the country’s real estate crisis has spooked investors and driven billions of people out of mainland China and Hong Kong’s financial markets. Thus, China’s contribution to global growth as a whole came into question and funds invested in Chinese companies began to see declining returns and losses due to money outflows to other areas geographical areas offering better returns.
Now, managed funds are trying to stay afloat while ETFs are booming. The exponential growth of exchange-traded funds highlights how global passive investing hits $8.1 trillionaccording to Bloomberg with data through September. “Index investing is being adopted by individual and institutional investors. And it is a trend that is likely to spread,” commented the CEO of China Asset Management. on the ground of the ETF), Xu Meng, while the Chinese authorities order latest policies in promoting this type of assets.
This Tuesday, a public holiday in China, cut off the entry of money into the mainland market and the Hong Kong stock exchange. But the flow of money to China was already demonstrated last Monday, where a new record of business volume above 54,000 million dollars and almost five times higher than the average of the last 52 weeks, according to Bloomberg.
This can be seen in the money flowing into the big four ETFs focused on Chinese stocks: KraneShares CSI China Internet ETF, iShares China Large-Cap ETF, Xtrackers Harvest CSI 300 China A-Shares ETF And iShares MSCI China ETF. Money invested in these four investment vehicles reached $1.5 billion last week which would mark the best week for the group of four since January 2022.
However, there are more than 280 ETFs focused solely on large Chinese equity firms and not all of them replicate or attempt to achieve the same profitability offered by indices such as the CSI 300. According to Goldman Sachs, the essential net purchases of the week. Last time it was in exchange-traded funds that pool individual Chinese stocks, such as those that focus on technology stocks or the development of artificial intelligence. “The S&P 500 is not the horse to ride this month of October and fear of being left behind in China increases” commented the investment bank’s managing director of global markets, Scott Rubner, who expects purchases in China to continue after the US elections as well.
However, money also enters the fixed income market or into investment vehicles managed by banks or investment funds. shops. The Spanish investor has access to more than 40 investment vehicles, in euros, focused on the shares of the Asian giant. And on average, They obtain a profitability of 16.5% in 2024 with closing data from last Friday with Morningstar data.
This increase contrasts with the returns obtained over the last two years given that the Three-year annualized return falls to -9.7% already five years at 1.68% which erases the gains recorded between 2020 and 2021. This year, Nordea 1 – Chinese stocks E EUR tops the ranking with a profitability of 26.3%, followed by GAM Multistock China Evolution Eq EUR B (yield of 24.8%) and DWS Invest Chinese Equities NCwhich makes 24.5% over the year. Annualized over three years, Fidelity vehicle only (Fidelity China Focus A-Acc-EUR) remains positive with 2.1%.
