China stocks were among the world’s top performers last year. The MSCI China Index jumped 31%, slightly trailing the 34% returned by the MSCI Emerging Markets Index.
Market observers believe stocks in the world’s second-largest can build on last year’s gains in 2026. That could put the spotlight on ETFs such as the WisdomTree China ex-State-Owned Enterprises Fund (CXSE ). That fund outperformed both of the aforementioned indexes last year.
The $504.3 million CXSE follows the WisdomTree China ex-State-Owned Enterprises Index. It could be at the right place at the right time again this year. That logic boils down to expectations of Beijing continuing to stimulate the Chinese economy, with growth companies leading again.
CXSE Growth Profile Is Meaningful
Most state-controlled companies reside in defensive or value sectors, reflecting their slow-growth postures. CXSE takes a different approach — one that’s more levered to China’s growth and innovation stories. It’s a good thing, too, because innovation is considered central to the 2026 China equity investment thesis.
“We are particularly optimistic about innovation and industrial upgrades, where strong policy support and global competitiveness are most apparent. Innovation-driven sectors are set to be among the fastest-growing and most favoured by the market as China strives for technological self-reliance and global leadership in pivotal industries,” observed BNP Paribas.
Confirming its growth profile, CXSE allocates more than 64% of its weight to the consumer discretionary, technology and communication services sectors. That tethers the ETF to China’s vibrant consumer internet story, as well as the country’s efforts to reduce reliance on tech imports. China’s tech progress could again be a prominent story in 2026, potentially bringing with it opportunity with CXSE.
“China’s capabilities are more advanced than many have assumed, and its underappreciated innovation capacity is starting to be valued by the market. Beijing’s 15th Five-Year agenda explicitly prioritises tech innovation, which should be a long-term tailwind for equities,” added BNP Paribas.
Other Stars in CSXE's Sky
Consumer cyclical stocks, which account for the ETF’s largest sector allocation at 29.06%, could also be 2026 sparks for the fund.
“We see exciting growth from within the consumption complex – services, experiences and sports – offering potentially vibrant opportunities for discerning investors,” concluded the French bank.
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