To The Moon

[For Hong Kong Investors Only] Just days after PBOC’s unprecedented monetary stimulus package, the first ever September politburo economic meeting held on 26 Sep came as a positive surprise and once again fueled China market. During the meeting, China has vowed to save the private economy, stabilize its property sector from further slumping and ensure necessary fiscal expenditures. No detailed numbers on fiscal stimulus has been reported yet, but we expect more follow-up policies in the coming months with the supportive regulatory stance.

Reasons behind some Global X China ETFs to Rally

In light of China government’s policy bazooka to boost economy, China stock market has surged with HSI/HS Tech/CSI 300 recording 9%/13%/10% returns since 24 Sep. In this article, we will take a closer look at the key outperformers in the current rally. (Source: Bloomberg, Data as of 26 Sep close)

Global X China ETF Recorded Strong Performance Amid Market Rebound

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

Global X Hang Seng TECH ETF (2837 HK) has experienced a significant rebound following the announcement of the PBOC’s strong stimulus package. Core internet platforms and technology companies rank among the top choices for global investors seeking opportunities in the Chinese market after the strong stimulus package. 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 EV and Battery ETF (2845 HK) $GX中国电车(02845)$

The Global X China EV and Battery ETF (2845 HK) has shown substantial recovery, riding on the strong rally in the Chinese market following the recent stimulus announcements. August EV sales exceeded 1mn unit, +32% YoY, with EV penetration reaching 54%. On policy front, the trade-in stimulus has been doubled to Rmb20k (from Rmb10k) per NEV, and Rmb15k (from Rmb7k) per eligible ICE Vehicle. As of 25 Sep, over 1.1mn trade-in applications have been received. The intense price competition could be taking a pause as automakers take more disciplined pricing strategy and consumer EV demand remains robust. In addition, as Fed enters rate cutting cycle, automakers (especially EV startups) will be benefiting from the lowering financing costs.

For battery industry, we could be seeing an inflection point in industry landscape as supply-demand dynamics continue to improve. Capex for Chinese battery makers decreased by over 50% from the peak, which should drive a subsequent decrease in capacity. Improving supply-demand dynamics should drive a gradual recovery in capacity utilization rate and support improving margin for key players. Meanwhile, demand remain robust with China battery domestic shipment growing by c.40% YoY in 1H24. The continue decrease in lithium prices should also lower the costs for battery and automakers and thus support better profitability outlook across the value chain.

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

China Consumer Brand ETF (2806 HK) has experienced a significant recovery since late September. We attribute the outperformance to:

1) Attractive valuation: China consumer sector has been under pressure YTD with compressed valuations. Consumer sector is currently trading at 11x PE, 2std below its long-term average, according to BofA (data as of September 6, 2024).

2) Ongoing policy support from local governments on top of central government’s initiatives: On September 25, Shanghai announced Rmb500mn vouchers for the public to stimulate spending in various sectors — Rmb360/90/30/20mn for dining/accommodation/movie tickets/sports. This initiative represents the first major action by a local government following the PBOC stimulus package and showcases positive attitude from local authorities.

3) Evident impact of previous policy support: The effects of earlier policy initiatives are becoming increasingly apparent, particularly with the consumer trade-in programs launched by NDRC in July. In August, passenger car sales increased by 10.8% MoM, with NEV sales growing by 17%. As of September 24, China has approved nearly Rmb11bn subsidies through the national automobile trade-in platform. In the home appliance sector, over 5.2m home appliance units have benefited from subsidies so far, amounting to Rmb4.67bn.

Global X China MedTech ETF (2841 HK) $GX中国医疗科技(02841)$

The Global X China MedTech ETF (2841 HK) offers investors an opportunity to gain exposure to Chinese companies involved in the manufacturing and distribution of medical devices. 2841 HK has demonstrated impressive recovery since late September. This outperformance can be attributed to enhanced liquidity post stimulus, which could support fiscal spending and medical insurance in a more favorable economic environment. Additionally, the YTD relative underperformance has contributed to this recent surge, while the improving consumption may also lead to the increase of the health expenditure.

Explore the above ETFs and their risk factors, please visit Global X ETFs Hong Kong website: https://www.globalxetfs.com.hk/fundlist/

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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.

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