Once slumbering China exchange traded funds started to get their groove back in November as investors bet valuations among the lowest in the developing world and recently announced reforms will foster further upside for Chinese shares.
Bolstered by Beijing’s reform-minded approach to improving the world’s second-largest economy, China-specific ETFs saw a combined $1.2 billion of inflow last month, according to data released by BlackRock on Monday. [Emerging Markets ETFs hit by November Outflows]
Inflows to China ETFs were seen even as investors pulled capital from Brazil and South Korea ETFs, among others, in November. The nearly $51 million Global X China Financials ETF (CHIX) led China ETFs last month with a gain of nearly 7%, but the good times did not end there.
“The proposed reforms aim to transform the world’s second-largest economy from dependency on exports and government infrastructure spending to being driven by consumer spending. With five dozen proposed measures, the reforms include giving foreign investors more market access, providing more financing for fast-growing private companies, raising the dividend payout on state-owned enterprises and relaxing the one-child policy,” reports Trang Ho for Investor’s Business Daily.
Relaxation of the one-child is season as a pivotal piece of China’s efforts to drive its massive economy to a higher level of domestic consumption in the years ahead.
Formal announcements that China is in fact looking to open its markets to additional foreign investment came soon after the debut of the db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) , a new ETF that grants investors direct exposure to once hard-to-access A-shares equities that trade on China’s mainland.
A case can be made that ASHR is one of the better-timed ETF introductions in recent memory. The fund debuted on Nov. 6 and has gained 4.3% since Nov. 13 while accumulating $172 million in assets under management.
ASHR is a valid play on the Chinese consumer, one of the country’s more alluring investment themes. Consumer discretionary and staples names combine for over 18% of the new ETF’s weight. [A-Shares ETFs Could Capture Investors' Attention]
China’s efforts to milk higher payouts out of its state-owned enterprises is an ongoing process, but at the end of the second quarter, China was the largest emerging markets dividend payer in dollar terms.
Should China keep moving forward on the dividend front ETFs that stand to benefit include ASHR, the iShares China Large-Cap ETF (FXI) and the iShares MSCI China ETF (MCHI) as well as the multi-country WisdomTree Emerging Markets Equity Income Fund (DEM) , which has an 18% weight to China.[Dividends and No Deficits on the Cheap With This ETF]
iShares MSCI China ETF