Statements made by China’s Politburo after mainland market closures mark a tonal shift in policy mandates from the government. The statements lifted the Hong Kong market and reflect missed opportunities for investors currently underweight China.
In a statement made Monday night after China’s market close, the Politburo (the CPC Central Committee’s Political Bureau) indicated a commitment to boosting the economy. It will do so by easing its monetary policies and being more proactive regarding fiscal policies. The open commitment to easing from the highest tier of government reflects the ongoing, notable policy shift happening on the Mainland.
“Using the phrase ‘moderately loose’ to describe monetary policies diverges from the usual term ‘stable’ for the first time since 2011,” explained Brendan Ahern, CIO of KraneShares, in the China Last Night blog. “The statement shatters the notion that China’s government is not focused on the economy, the stock market, and housing prices.”
In addition to favorable monetary policy commentary, the Politburo noted the need to grow domestic consumption and demand. It also remains committed to bringing stability to stock markets, the real estate sector, and foreign investments. The Politburo also noted a desire to create a “modern industrial system” built on tech and scientific innovations, Ahern explained.
Investors also have the China Economic Work Conference to look forward to this week. The CEWC should bring additional policy clarity that could prove a boon for Chinese markets.
Favorable Policy Support Creates Tailwind Potential
“Today’s move is highly problematic for strategists and institutional investors who are underweight China in their models or portfolios,” said Ahern. KraneShares offers exposure to China’s domestic markets through its flagship fund, the KraneShares Bosera MSCI China A 50 Connect Index ETF (KBA ).
KBA invests in China-A shares within mainland China across multiple sectors — specifically those from the MSCI China A 50 Connect Index, and transacts in the renminbi. This fund seeks to capture 50 large-cap companies with the most liquidity and listed on the Stock Connect.
It also offers risk management through the futures contracts for eligible A-shares listed on the Stock Connect. The index uses a balanced sector weight methodology to give exposure to the breadth of the country’s economy. KBA has a management fee of 0.56%, with contractual fee waivers that end 8/01/25.
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