To The Moon

At the State Council press conference held on 24 September, PBOC announced a comprehensive package of monetary policy stimulus that exceeds market expectation. We see the launch of new monetary tools to support stock market, as well as the simultaneous cut of RRR, policy rate and mortgage rate at a relatively large magnitude, as unprecedented. More importantly, this signals regulator’s stance to tackle China’s growth concern in a more proactive manner, which bodes well for a more sustainable equity market rebound.

Global X ETFs in Focus

Below, we’d like to share ideas on how some of Global X China ETFs relate to the stimulus package.

Global X Hang Seng High Dividend Yield ETF (3110 HK) $GX恒生高股息率(03110)$

Amid macro uncertainty and a lower rate environment, high dividend strategy continues to gain traction as stable dividend yields appear more appealing. PBOC’s Rmb300bn relending program should drive an increase in corporate share repurchase and enhance overall shareholder returns. In addition, there are potential incremental fund flows from household savings currently deposited in the bank to seek higher yield, as savings rates are falling. For financial sector, PBOC committed to lower deposit rates to keep Banks’ net interest margins stable, and Brokers could also benefit from improved capital market activities as high-quality M&A are encouraged by regulators.

Among major markets, Hong Kong high dividend stocks deliver the most attractive dividend yield thanks to the lowest valuation among peers. Its healthy free cash flow and relatively conservative payout ratio should support more sustainable dividend payment. Compared to A Share listed peers, Hang Seng High Dividend Yield Index offers exposure to Hong Kong Infrastructure, Utilities, and property (REITs) stocks, which provide stable dividends and limited price downside given low valuation.

Global X China Consumer Brand ETF (2806 HK) $GX中国消费(02806)$

With monetary policy support, companies will have lower financing costs and higher investment, which can improve the overall economic outlook. This enhancement in the economic landscape is expected to boost consumer sentiment and increase consumers’ willingness to spend. Additionally, we believe that the stimulus package will significantly improve investor sentiment and liquidity with the A-share market as the primary beneficiary. Notably, 96% of the holdings in the Global X China Consumer Brand ETF consist of China-listed companies.

Global X China Consumer Brand ETF (2806 HK) focuses on investing in leading consumer companies across various categories, including beverages; hotels, restaurants & leisure; and household durables. Within our portfolio, the beverage sector is our top holding category (27%), with Moutai representing 9.6% of our holdings. Beverage sector has faced challenges recently and we believe these issues are already reflected in the stock performance with a 20% decline in Moutai’s share price from its YTD peak in May (vs. SSE Composite Index -9%). We expect the stimulus to positively impact sector’s short-term valuation. In addition, Moutai recently announced its first-ever share buyback plan, valued at Rmb3-6bn, on top of its 2024-26 dividend plan. This initiative will further uplift sentiment not only for Moutai but for the beverage sector as a whole.

Global X Hang Seng Tech ETF (2837 HK) $GX恒生科技(02837)$

Global X Hang Seng Tech ETF (2837 HK) comprises 30 renowned Chinese internet platforms, consumer tech companies (Smartphone, PC), and other high-tech companies (EV, Semiconductor) that rank among the top choices for global investors seeking opportunities in the Chinese market. The unique investment value for Hang Seng Tech is also defined by its attractive valuation, ongoing margin expansion, and continued ramp up in shareholder returns. With well-established ecosystem containing large user base and leading technology in place, we see further upside potential for these leading technology companies coming from the rapid development of structural growth themes such as EV and AI in China.

Global X China Little Giant ETF (2815 HK) $GX中国小巨人(02815)$

Global X China Little Giant ETF (2815 HK) presents investors with a unique opportunity to gain exposure to promising small- and medium-sized enterprises (SMEs) operating in strategic sectors, such as semiconductors, advanced manufacturing, pharmaceuticals, and clean energy. As mentioned above, the A-share market is poised to be the primary beneficiary of the stimulus, and it is important to note that all holdings within the China Little Giant ETF are listed in the A-share market.

YTD, the stock performance of SMEs has been under pressure due to an uncertain economic landscape and compressing valuations across the sector. However, signs of an improving economic outlook could lead to a pivotal shift in investor sentiment, prompting a reallocation of capital towards these high-quality SMEs. These companies have demonstrated resilience and possess the potential for significant rebounds and alpha generation for investors as market dynamics evolve.

Explore the Global X Hang Seng High Dividend Yield ETF and its risk factors, please visit https://www.globalxetfs.com.hk/funds/hang-seng-high-dividend-yield-etf/

Explore the Global X China Consumer Brand ETF and its risk factors, please visit https://www.globalxetfs.com.hk/funds/china-consumer-brand-etf/

Explore the Global X Hang Seng TECH ETF and its risk factors, please visit https://www.globalxetfs.com.hk/funds/china-consumer-brand-etf/

Explore the Global X China Little Giant ETF and its risk factors, please visit https://www.globalxetfs.com.hk/funds/china-little-giant-etf/

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This material is intended for Hong Kong investors only. It is not a solicitation, offer, or recommendation to buy or sell any security or other financial instrument. Investment involves risks. Past performance information presented is not indicative of future performance. Investing in the funds may expose to risks (if applicable) including active investment management risk, futures contracts risk, margin requirement risk, failure of clearing house risk, concentration risk, securities lending transaction risks, currency risk, distributions paid out of capital or effectively out of capital risk, and trading risks. Investors should refer to the Fund's prospectus for details, including the risk factors. Statements concerning financial market trends or portfolio strategies are based on current market conditions, which will fluctuate. There is no guarantee that these opinions are suitable for all investors and each investor should evaluate their ability to invest for the long term, especially during periods of downturn in the market. Outlook and strategies are subject to change without notice. Issuer: Mirae Asset Global Investments (Hong Kong) Limited. This material has not been reviewed by the Securities and Futures Commission. Copyright © 2024 Mirae Asset Global Investments. All rights reserved.