The Chinese government may finally have unleashed the government support China investors were looking for. The People’s Bank of China (PBOC) announced some significant monetary policy changes that could change the overall outlook for China equities. That includes impactful changes for mortgage rates and overall lending. The overall picture, then, may be improved for China equities.
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Per analysis from the China analysis blog China Last Night, the move may be the “policy bazooka” markets have waited for. The central bank’s moves also include reducing the minimum down payment for mortgages, a new fund for affordable housing, lowering minimum bank ratios to boost lending, and additional Tier 1 capital for the six large banks, per analysis.
China Equities and Monetary Policy
Together, wrote KraneShares Chief Investment Officer Brendan Ahern, that indicates that “the Mainland market’s decline is not going to be tolerated.”
What, then, does that mean for China equities? The right China ETF could provide a balanced, appealing allocation to the country. ETFs’ capability of offering transparent, tax-efficient, and thematic exposures can help make that happen.
The KraneShares CSI China Internet ETF (KWEB ) stands out as one notable option. The strategy has returned 21.3% since inception on a cumulative basis per KraneShares data. KWEB charges a 70 basis point (bps) fee and currently holds more than $4 billion in AUM. The China equities ETF invests in major e-commerce and internet firms operating in China.
While it has had an up and down year, KWEB has returned 4.1% over one month per ETF Database. That has beaten its ETF Database Category and Factset Segment averages over that time frame. While China equities haven’t lit up the dashboards so far this year, a strong end to 2024 in terms of macro support could provide an intriguing entry opportunity for China-driven diversification.
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