Advertisement
U.S. markets open in 7 hours 56 minutes
  • S&P Futures

    5,208.50
    -6.25 (-0.12%)
     
  • Dow Futures

    39,210.00
    -13.00 (-0.03%)
     
  • Nasdaq Futures

    18,184.25
    -47.25 (-0.26%)
     
  • Russell 2000 Futures

    2,047.40
    -2.40 (-0.12%)
     
  • Crude Oil

    82.58
    -0.14 (-0.17%)
     
  • Gold

    2,162.00
    -2.30 (-0.11%)
     
  • Silver

    25.27
    +0.01 (+0.04%)
     
  • EUR/USD

    1.0870
    -0.0007 (-0.07%)
     
  • 10-Yr Bond

    4.3400
    0.0000 (0.00%)
     
  • Vix

    14.33
    -0.08 (-0.56%)
     
  • GBP/USD

    1.2711
    -0.0017 (-0.13%)
     
  • USD/JPY

    150.3110
    +1.2130 (+0.81%)
     
  • Bitcoin USD

    64,837.48
    -3,937.82 (-5.73%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • FTSE 100

    7,722.55
    -4.87 (-0.06%)
     
  • Nikkei 225

    39,894.39
    +153.99 (+0.39%)
     

PBOC Monetary Policies Are A Boon For China Stocks, ETFs

When a central bank enacts loose monetary policies, investors typically try to ride the wave. As the People Bank of China increases its monetary stimulus, Chinese stocks, along with related exchange traded funds, could rally.

JPMorgan Chase & Co. )NYSE JPM) raised its position on Chinese stocks to neutral from underweight, arguing that shares will rally through October after the Hang Seng China Enterprises Index entered a bull market, Bloomberg reports.

The iShares China Large-Cap ETF (FXI) , which tracks the 25 largest Chinese equities traded on the Hong Kong Stock Exchange, is up 8.3% year-to-date while the SPDR S&P China ETF (GXC) , which includes New York and Hong Kong-listed Chinese companies, is up 6.0%,

China’s central bank enacted a larger-than-estimated increase in new credit and reduced reserve requirements for some lenders. [China ETFs: Low Inflation Leaves Room for More Stimulus]

“The scale of monetary stimulus since June is a surprise,” Adrian Mowat, JPMorgan’s chief Asia and emerging-market strategist, wrote. “All these changes indicate a more aggressive approach to driving growth.”

Standard Chartered Plc’s Erwin Sanft and Templeton Emerging Markets Group’s Mark Mobius are predicting that the rally could extend as the government promotes growth. Premier Li Keqiang affirmed that the government will “ensure” a minimum annual economic growth rate of 7.5%. Meanwhile, the country’s manufacturing industries expanded at its fastest clip in 18 months over July, along with strong earnings growth.

Additionally, the low valuations could continue to attract investors. FXI shows a 7.8 price-to-earnings ratio and GXC has a 9.1 P/E ratio.

The ETFs include Chinese H-shares, or stocks issued by Chinese companies incorporated in the mainland that are listed on the Hong Kong Stock Exchange.

In comparison, a string of new China ETF launches are based of Chinese A-shares, or mainland-listed stocks that trade on Shanghai or Shenzhen exchanges, including the Market Vectors ChinaAMC A-Share ETF (PEK) , db X-trackers Harvest CSI 300 China A-Shares Fund (ASHR) and the KraneShares Bosera MSCI China ETF (KBA) . [Asia’s A-Shares ETF Market Differs From U.S.]

For more information on China, visit our China category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Advertisement