While many Americans who’ve bought homes in the last year face higher mortgage rates, Chinese mortgage-holders are seeing rate cuts. Per media reports, the move has yet to be finalized, but it does follow previous coverage suggesting authorities were considering a cut. Such a move could boost overall consumer spending in China and perhaps even tap into savings left over from the “Zero COVID” lockdown era. In such a scenario, China consumer ETFs could stand to benefit.
See more: A China ETF to Watch as China’s Central Bank Makes Key Move
The KraneShares Bosera MSCI China A 50 Connect Index ETF (KBA ), for example, could offer one potent option. The strategy tracks a subset of market cap-weighted large and mid-cap Chinese equities. The strategy includes two of the largest stocks from each GICS sector in that space. KBA puts securities in the portfolio until the total number of firms hit 50.
KBA and China Consumer ETFs
Among China consumer ETFs, the fund stands out for that diversification across GICS sectors. In this case, however, its weight to consumer non-durables, or goods consumed in one use or in less than three years, is what can help. Should consumers have more to spend, that sector could benefit. KBA has returned 4.6% over the last six months on a cumulative basis, per KraneShares. On a YTD basis, it’s done even better, returning 5.3%.
That YTD return sets it apart from other China consumer ETFs. KBA has outperformed both its ETF Database Category and Factset Segment averages on a YTD basis. Standing out in that way, the fund could be poised to benefit from a potential cut to further macroeconomic support on top of possible mortgage rate cuts. For those looking to diversify away from the U.S., KBA may appeal.
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