Rising Chinese Stock Market Brings a Smile to Chinese ETFs
Expectations for Economic Stimulus Boost Chinese Stock Market Consecutive Gains... Chinese ETFs Dominate Top February ETF Returns
[Asia Economy Reporter Song Hwajeong] China-listed exchange-traded funds (ETFs) continue to deliver high returns. As the Chinese stock market escapes the negative impact of the novel coronavirus disease (COVID-19) and rises daily on expectations of economic stimulus measures, China-related ETFs are also showing strength.
According to the Korea Exchange on the 24th, most of the top-performing ETFs in February were China-related ETFs. KODEX Shenzhen ChiNext (synthetic) rose 27.39% in February, the highest increase, followed by ARIRANG Shenzhen ChiNext (synthetic) at 22.50%. TIGER China CSI300 Leverage (synthetic) (22.39%), KINDEX China Mainland CSI300 Leverage (synthetic) (22.10%), SMART China Mainland Small & Mid Cap CSI500 (synthetic H) (16.14%), KINDEX China Mainland CSI300 (12.39%), and TIGER China CSI300 (11.73%) also ranked within the top 10 in returns. Except for three ETFs in the top 10, all were China-related ETFs.
The strong performance of China ETFs is due to the sustained upward trend in the Chinese stock market this month. The Shanghai Composite Index rose 2.21% since the beginning of the month. After falling 7.72% on February 3, the first trading day of the month, it has risen more than 10%. February had only one down day, which was on the 3rd.
Although China is the epicenter of COVID-19, the Chinese stock market fully reflected the negative impact of the virus on February 3, the first trading day after the Lunar New Year (Chunje) holiday, and has since maintained an upward trend on expectations of economic stimulus measures. Jeon Jong-gyu, a researcher at Samsung Securities, analyzed, "The Chinese stock market has completed the first phase of price recovery after the COVID-19 shock. The Shanghai market plunged more than 7% upon reopening after the Chunje holiday, but it recovered to the 3000 level, which was the pre-Chunje shock price level, reflecting the government's strong quarantine system establishment, improvement in disease indicators, and the launch of stimulus policies by policymakers." He added that in the past case of Severe Acute Respiratory Syndrome (SARS), the time taken to recover previous highs after passing the price bottom was about one month, showing a similar trajectory. It is expected that the second phase rebound of the Chinese stock market will resume around the National People's Congress (NPC) of China.
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There is particular attention on technology stocks. ETFs related to ChiNext, known as the Chinese Nasdaq, stood out by ranking first and second in February returns. Han Jeong-sook, a researcher at Mirae Asset Daewoo, said, "Investors are positive about ChiNext, which has a high proportion of high-tech related technology stocks and related companies. On January 17, the China Securities Regulatory Commission relaxed regulations such as simplifying refinancing procedures for ChiNext-listed companies and high-tech firms. These companies are expected to be able to defend against financial deterioration shocks caused by COVID-19 as fundraising becomes easier."
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