China stocks have been a source of frustration for investors this year. But there are expectations that situation will improve in 2024. The key is selectivity. That means market participants shouldn’t wager on uniformly stellar returns by China equities next year.
One segment that bears watching is the Chinese consumer, indicating that the KraneShares CICC China Consumer Leaders Index ETF (KBUY ) could be among the China-specific ETFs worth considering in 2024. KBUY, which turned three years old last week, follows the CICC China Consumer Leaders Index. The fund features a mix of consumer cyclical and staples stocks.
In recent years, there have been plenty of headlines regarding the allure of the China consumer investment thesis. Beijing would like to drive more domestic consumption. But the government’s investment efforts have largely been infrastructure-driven. Some experts believe that’s poised to change. They feel 2024 could mark an earnest shift on that front, perhaps spelling opportunity with KBUY.
China ETF KBUY Could Shine in 2024
Green shoots are emerging that the world’s second-largest economy could already be shifting toward more domestic consumption, thus potentially paving the way for KBUY upside. In a recent interview with Barry Gill, head of investments at UBS asset management, Dr. Keyu Jin of the London School of Economics highlighted changing consumption habits.
“Consumption habits are changing. The younger generation likes to borrow, and they spend at least twice as much than previous generations on things like food and clothing, despite having much less income,” noted Jin. “The notion of ‘lying flat’ captures a generational rejection of societal pressure to be an overachiever. It (somewhat simplistically) depicts a generation that is highly educated and wants to enjoy life along with working hard. Of course, there are exceptions; entrepreneurial stars that are as ambitious, hardworking and disciplined as anyone in the world.”
Owing to young, upwardly mobile Chinese citizens, many of whom live in the country’s major cities, there are interesting implications for assets such as KBUY.
“In terms of sectors, there is a lot of competition in consumer-related sectors. But for snacks, specialty coffees, apparel and so on, luxury conglomerates enjoy a premium. Many younger Chinese are observing busy urban lifestyles and innovating to make people’s lives just a little bit better,” added Jin.
Another point in favor of KBUY heading into 2024 is the ETF has more of a growth than value feel. That is pertinent at a time when market observers believe it will be growth, not value, stocks that drive a 2024 rebound by Chinese equities.
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