'China ETF' Shaken by Supply Chain Restructuring... Doubts Remain Over Rebound Potential

Poor Performance of China-Related ETFs This Year
‘Sell China’ Phenomenon Continues Amid US Supply Chain Restructuring
"China Economy Unlikely to Show Strong Recovery"

Since the US-led global supply chain restructuring, China-related exchange-traded funds (ETFs) have recorded poor performance this year. Moreover, analysts suggest that it will be difficult to secure short-term rebound momentum.

According to the Korea Securities Depository's securities information portal, SEIBRO, on the 28th, Mirae Asset Global Investments' 'TIGER China Electric Vehicle Solactive' ETF, which invests in China's electric vehicle industry, showed a return of -31.6% since the beginning of the year. This product rose to become the largest overseas stock ETF by net asset size in April 2021, but in September, about two years and five months later, it lost its position to 'TIGER US Nasdaq 100.' As of the 24th, the net asset value of TIGER China Electric Vehicle Solactive was approximately KRW 2.0879 trillion, falling further behind TIGER US Nasdaq 100 (approximately KRW 2.5059 trillion). The 'TIGER China STAR Market STAR 50 (Synthetic)' showed a return of -11.29% since the beginning of the year. The so-called 'Xi Jinping Index,' the STAR Market STAR 50 Index, consists of 50 innovative technology companies directly fostered by the Chinese government.

KB Asset Management's 'KBSTAR China MSCI China (H),' which tracks the representative China index published by Morgan Stanley Capital International (MSCI), recorded a return of -10.91% since the beginning of the year. KBSTAR China Mainland CSI 300, which invests in the CSI 300 Index composed of 300 large-cap stocks in China, was relatively recently launched in August and traded up to KRW 9,990 per share but closed at KRW 8,700 per share the day before.

In contrast, excluding China, Samsung Asset Management's 'KODEX Asia Semiconductor Supply Chain ex China Active' ETF, which invests in the semiconductor industries of the three Asian countries?Korea, Taiwan, and Japan?has recorded a return of 36.83% since its launch in February.

Experts analyzed that the US, engaged in a 'hegemony war' with China, is continuing the 'Sell China' phenomenon alongside its supply chain restructuring efforts. Lee Sang-won, Executive Director and Head of Product Strategy at Korea Investment Management, recently explained at the 'India & VIM Seminar' that "China, which has positioned itself as the world's factory, has grown rapidly based on its large population and low labor costs, but the US no longer desires China to play this role."

He further analyzed that Mexico, a geographically adjacent country to the US (nearshoring), and India, Vietnam, Indonesia, Korea, and Japan, which are technology holders and security allies (friendshoring), have benefited from the supply chain restructuring. Last year, Mexico and the 'AltAsia (Alternative Asian Supply Chain),' which includes 14 major Asian countries, were found to surpass China in terms of labor population, highly educated workers, and exports to the US.

Although the Chinese government is considering large-scale capital injections to stimulate the economy, a short-term rebound is expected to be difficult. Jung Jin, head of the ETF Consulting Team at Samsung Asset Management, explained, "China's role in the global economic structure is shrinking, and the sluggish consumer economy is weighing on the stock market," adding, "The slow pace of improvement in the real estate industry continues to have a negative impact."

He continued, "Deflationary pressure (falling prices amid economic recession) is increasing, but unlike before, the Chinese government is reluctant to stimulate the economy through credit supply," analyzing, "In the past, the effect of revitalizing the real economy through liquidity supply was limited, while increased credit led to asset bubbles in real estate and stocks."

Min Byung-gyu, a researcher at Yuanta Securities, said, "It is difficult to expect a strong recovery in the Chinese economy," and predicted, "The US's containment and challenges, which are ongoing regardless of regime changes for long-term hegemony, will continue." He added, "Investor sentiment toward the Chinese stock market is unlikely to recover in the short term," and pointed out, "The global capital trend this year is de-Chinaization, and considering the economy, it is necessary to lower expectations for the Chinese stock market."

Regarding the recent 'reconciliation atmosphere' created through a summit between the US and China, Executive Director Lee said, "There may be variations in pace, but this is not an issue that will change the overall landscape," adding, "Since COVID-19, the US has solidified its judgment that close supply chains with China pose a threat to itself."

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