China significantly outperformed within its region on higher-than-expected services PMI and indications of further policy support while all eyes remain on the U.S. presidential election. Continued regulatory support remains a boon for Chinese stocks, creating an overlooked opportunity for investors according to KraneShares.
“While the world is focused on the US Presidential election, though I would argue who takes the House and Senate is just as important, China’s economy and stock market are grinding higher with little attention.” That’s according to Brendan Ahern, CIO of KraneShares, on the China Last Night blog.
The Caixin China General Services PMI, a survey conducted by S&P Dow Jones, rose from 50.3 last month to 52 this month on expectations of 50.5. Any reading above 50 is viewed as positive growth. It’s the fastest growth in the last three months, buoyed by recent and ongoing stimulus measures taken by the government.
The services sector outperformance mirrors October’s manufacturing growth. China’s combined October services and manufacturing PMI, the Caixin/S&P Global Composite PMI, climbed to 51.9 from 50.3 last month, reported Reuters.
In addition to the services PMI beat, Premier Li indicated in a keynote speech at the China International Import Expo in Shanghai that the government had plenty of room to accommodate further monetary and fiscal policy support. Mainland and Hong Kong markets surged in Tuesday trading.
Consider KWEB When Looking to Invest in China
“Today’s Mainland market resilience and strong flows into Hong Kong from Mainland China should give investors something to think about,” Ahern noted. “I wouldn’t be short as maybe they plow money into the market post-US election results.”
With the Chinese government still focused on its 5% GDP goal for the year, investors looking to gain access to growth names in China would do well to consider the KraneShares CSI China Internet ETF (KWEB ).
KWEB measures the performance of publicly traded companies outside of mainland China that operate within China’s internet and internet-related sectors. It seeks to track the CSI Overseas China Internet Index. The index provides exposure to the China internet equivalents of Google, Facebook, Amazon, and eBay. It trades in securities on the Nasdaq Stock Market, the Hong Kong Stock Exchange, or the New York Stock Exchange.
See also: KWEB Benefits as China Stocks and US ADRs Diverge
In the last two years, the fund has worked to convert all possible share classes to Hong Kong shares. By reducing exposure to ADRs, the fund seeks to protect investors from risk. Currently, 67.2% of KWEB is invested in Hong Kong and 31.2% in the U.S.. Another 1.6% is expected to convert to a Hong Kong relisting as of 11/04/24.
The ETF carries an expense ratio of 0.70%
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