To close 2023, there’s been a flood of bullish calls on China stocks for 2024. That isn’t surprising when considering the asset class is headed toward a third consecutive losing year.
Perhaps adding to the allure of China stocks and related ETFs as 2024 rebound ideas is that market observers believe the rally, assuming it materializes, will be broad-based. They also think it would include mainland-listed A-shares as well as Chinese stocks trading in Hong Kong. That could signal opportunity with the KraneShares MSCI All China Index ETF (KALL ). The fund holds shares of Chinese firms listed in Hong Kong, Shanghai, and the U.S.
The downside of KALL’s structure is that it has provided investors with little shelter from the storms hindering China stocks this year. But the other side of the coin is that the ETF has the depth necessary to participate in what could be expansive resurgence by Chinese stocks next year.
Call on KALL for China Leadership
As noted above, experts are bullish on the prospects for both onshore and offshore Chinese stocks in 2024. But their forecasts aren’t uniform across both groups. Some analysts see A-shares delivering more upside next year . Others believe the same will be true of Hong Kong-listed fare.
It’s possible ordinary investors could pick the winner between A- and H-shares. It’s also possible they could pick the wrong group. Due to its exceptional depth, KALL ameliorates that burden. That’s a good thing at a time when China stocks look cheap across the board.
“The decline has been startling. Leading benchmarks are close to the lows they plumbed in 2016 following the collapse of China’s epic stock market bubble. The MSCI China Index, which tracks stocks on mainland bourses as well as Chinese companies listed in Hong Kong and New York, is down 15% this year. It trades at 9 times forecast earnings for the next 12 months, according to LSEG, half the multiple it commanded when it peaked in 2021,” reported Reuters.
KALL and China stocks at large could be supported in 2024 by another factor. That is the entry of more local retail investors into stocks. For years, many Chinese investors have parked cash in bonds and cash instruments and real estate. But interest rates may not favor the former, while many are priced out of the latter. That leaves equities as potentially the best alternative.
“China’s ageing population also lacks reliable places to park its wealth. Household savings in China have ballooned by 70% to 135 trillion yuan ($18.8 trillion) since the pandemic started. Yet housing, once the preferred investment, looks less assured with millions of homes unfinished and debt problems dragging down top developers,” added Reuters.
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