Investors and advisors may have seen some slowing China growth and grown concerned, but recent positive data for the country may encourage them.
Chinese firms are significantly cheaper than U.S. equities, with the MSCI China Index trading at just 10.8% the next 12 months’ earnings. That creates an appealing background to invest on positive data for the country with an ETF like the KraneShares Bosera MSCI China A 50 Connect Index ETF (KBA ).
The People’s Bank of China (PBOC) cut its reserve ratio requirements for local lenders by 25 basis points (bps). Market watchers expect that move to add additional liquidity to the Chinese economy and potentially boost growth. However, the data that dropped Friday regarding industrial production and retail sales stands out as the most significant of those overall points.
Those data drops on Friday showed that both retail sales and industrial product grew more than expected in August. While that does not ease overall concerns about the economic situation in the country, it suggests that media negativity may unnecessarily overshadow China investing opportunities. That may remind investors to check out a strategy like KBA and its approach to large- and mid-cap China equities.
An ETF for Positive China Data
Why KBA? The strategy tracks a subset of market-cap-weighted large and mid-cap Chinese equities based in Shanghai and Shenzhen. It adds two of the largest stocks from each GICS sector, with the rest weighted by market cap until the total count hits 50. KBA charges 55 bps and has returned 14.4% over the last year.
The strategy holds big firms that may not be immediately recognizable to U.S. investors but still appeal; for example, the Contemporary Amperex Technology Co. (SZSE). SZSE produces batteries and battery tech for electric vehicles and other battery-reliant industries.
For those investors intrigued by positive China data, investing in the country offers intriguing opportunities. Investors interested in exposure to the country may want to keep a close eye on KBA in the weeks ahead.
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