The Biggest Gap in Overseas Stock ETFs Is China

8 of the Top 10 Loss Leaders Are Chinese ETFs

[Asia Economy Reporter Hwang Yoon-joo] Early this year, expectations for a revival of the Chinese stock market grew due to the Chinese financial authorities' announcement of monetary easing policies, but the loss rates of Chinese stock Exchange-Traded Funds (ETFs) recorded double-digit negatives. Notably, 8 out of the top 10 overseas stock ETFs were Chinese ETFs. This is attributed to lockdowns related to the resurgence of COVID-19 and the possibility of sanctions related to Russia's invasion of Ukraine.

According to the Korea Exchange on the 28th, among overseas ETFs based on stocks, all ETFs ranked 2nd to 9th in loss rate since the beginning of this year (3-month profit and loss rate) were Chinese ETFs.

Specifically, ▲KODEX China H Leverage (H) -25.91%, ▲Tiger China CSI300 Leverage (Synthetic) -24.59%, ▲KB Star China Hang Seng Tech -21.69%, ▲KINDEX China Hang Seng Tech -20.60%, among others.

On the 28th, when 187,213 new COVID-19 cases were reported, the temporary screening clinic in front of Seoul City Hall was less crowded than usual. Photo by Moon Honam munonam@

While global stock markets are showing a downward trend, the reason why Chinese ETFs have particularly large loss rates can be attributed to two main factors. First, concerns that both production and consumption in China may deteriorate again. Although economic indicators such as industrial production (YoY +7.5%), fixed asset investment (YoY 12.2%), and retail sales (YoY +6.7%) for January and February, which precede the mood of Chinese industry, were good, some cities including Changchun and Shenzhen were locked down due to a rapid increase in COVID-19 cases after the closing of the Beijing Winter Olympics in February.

The war between Russia and Ukraine is also accelerating the withdrawal of foreign investors. The U.S. Securities and Exchange Commission (SEC) announced earlier this month that six Chinese companies listed in the U.S. would be placed on the 'pre-delisting list.' Concerns that major Chinese big tech companies listed in the U.S., such as Alibaba and JD.com, could also be delisted caused the Chinese Nasdaq equivalent 'Hang Seng Tech' and large-cap stocks to plunge together. Looking at the ETF compositions ranked among the top loss makers, big tech stocks such as Alibaba, Baidu, BYD, Xiaomi, and Tencent dominate.

The official reason for the sanctions was that Chinese companies did not comply with the Public Company Accounting Oversight Board (PCAOB) financial audit obligations, but interpretations suggest that diplomatic stances related to the Russian invasion also had an impact.

Kim Kyung-hwan, a researcher at Hana Financial Investment, explained, "Among all historical Hang Seng Index PBR 1x breakdown phases, the shocks from events outside fundamentals and financial/foreign exchange systems (war/diplomacy/epidemic control) were the greatest," adding, "Since the beginning of the year, foreign investors in mainland China have turned to a net outflow of 30 billion yuan."

This content was produced with the assistance of AI translation services.