To The Moon

As a result of a series of stronger-than-expected policies being introduced, investor confidence has been reignited, resulting in a significant increase in both Hong Kong and A-share market prices today. After a period of volatility and correction, analysts believe that the market is now entering a period of broad-based recovery. 

Why Invest in China Now?

There are several key reasons that make China a compelling investment opportunity at this moment:

1. Valuations Are Relatively Low

Over the past few years, China’s stock market has been impacted by various factors, such as the COVID-19 pandemic, regulatory tightening, and geopolitical tensions. This has resulted in lower valuations for Chinese stocks, especially in comparison to other global markets. For long-term investors, these lower valuations may represent an attractive entry point.

2. Policy Support

China will cut commercial banks’ reserve requirement ratio and other policy rates by the end of the year, depending on the liquidity condition, PBOC governor Pan Gongsheng said at a financial forum in Beijing on Friday.

3. Federal Reserve Rate Cuts

A potential easing of monetary policy by the U.S. Federal Reserve typically leads to increased global liquidity, making borrowing costs cheaper and encouraging capital flows into risk assets. Investors in search of higher returns may allocate funds to emerging markets, with China being a prime candidate due to its growth potential.

4. RMB Appreciation

As the Fed initiates rate cuts, the Chinese yuan (RMB) is expected to appreciate against the U.S. dollar, making RMB-denominated assets relatively cheaper for foreign investors. This currency appreciation adds to the appeal of investing in A-shares, offering additional gains through exchange rates.

Investment Options for China

When thinking about investing in China, the most obvious choice might be the big tech companies like $Alibaba(BABA)$ , and $TENCENT(00700)$ However, besides individual stocks, a great way to manage non-systematic risk is through Chinese ETFs. Below are some options across both U.S. and Hong Kong markets:

U.S.-Listed China ETFs:

• $iShares MSCI China ETF(MCHI)$ managed by BlackRock’s iShares, tracks the MSCI China Index, providing exposure to large and mid-cap companies in both mainland China and Hong Kong. Key sectors include technology, finance, consumer goods, and telecommunications. Its top holdings are Tencent (17%), Alibaba (8.9%), and other big names like Pinduoduo, Meituan, China Construction Bank, Xiaomi, and Ping An Insurance.

• $KraneShares CSI China Internet ETF(KWEB)$ focuses on tracking the CSI China Overseas Internet Index, which includes China’s top internet companies listed overseas in the U.S. or Hong Kong. This ETF invests in major online platforms and services such as Alibaba (11%), Tencent (11%), Meituan (9%), JD.com, Pinduoduo, KE Holdings, and Trip.com.

• $iShares China Large-Cap ETF(FXI)$ tracks the FTSE China 50 Index, composed of the 50 largest, most liquid companies listed on the Hong Kong Stock Exchange. This fund includes blue chips, red chips, and state-owned enterprises, covering sectors like finance, energy, and telecommunications. Top holdings include Alibaba, Meituan, Tencent, China Construction Bank, and Industrial and Commercial Bank of China (ICBC).

• Like FXI, both $Direxion Daily CSI 300 China A Share Bull 2X Shares(CHAU)$ and $Direxion Daily CSI 300 China A Share Bear 1x Shares(CHAD)$ track the FTSE China 50 Index, with identical holdings to FXI but offering greater risk exposure. CHAU provides 2x leveraged exposure and CHAD provides 2x inverse exposure to Hong Kong-listed companies.

• YINN and YANG also track the FTSE China 50 Index, with the same holdings but offering more leveraged exposure. $Direxion Daily FTSE China Bull 3X Shares(YINN)$ offers 3x leveraged exposure, and $Direxion Daily FTSE China Bear 3X Shares(YANG)$ offers 3x inverse exposure to companies listed in Hong Kong.

• $X-trackers Harvest CSI 300 China A-Shares Fund(ASHR)$ aims to track the CSI 300 Index, which represents the 300 largest and most liquid companies listed on the Shanghai and Shenzhen stock exchanges. Through this ETF, investors can gain broad exposure to China's domestic A-share market.

• $Invesco China Technology ETF(CQQQ)$ tracks the performance of the FTSE China Incl A 25% Technology Index, which includes technology companies listed in both China A-shares and H-shares markets. In addition to internet companies, the index covers semiconductor firms.

• $SPDR S&P China ETF(GXC)$ tracks the performance of the S&P China A 50 Index, composed of 50 of the largest and most liquid companies in China’s A-share market. This ETF offers exposure to key sectors of China's economy.

• $Direxion Daily CSI China Internet Index Bull 2x Shares(CWEB)$ provides 2x leveraged exposure to the CSI Overseas China Internet Index, primarily investing in Chinese internet companies listed in the U.S. and other overseas markets.

Hong Kong-Listed China ETFs:

• $TRACKER FUND(02800)$ This is one of the most popular ETFs in the Hong Kong market, tracking the performance of the Hang Seng Index. It includes major players such as Tencent, AIA, and HSBC. With over HKD 1 trillion in assets under management, it’s a great option for gaining exposure to the broader Hong Kong stock market.

• $CSOP A50 ETF(02822)$ This ETF tracks the FTSE China A50 Index, which includes the 50 largest companies listed on the Shanghai and Shenzhen stock exchanges. The fund provides exposure to key sectors like finance, consumer goods, and technology, offering a way to access the A-share market directly.

• $CSOP HS TECH(03033)$This ETF tracks the Hang Seng Tech Index, which includes China’s leading tech giants such as Alibaba, Tencent, Meituan, JD.com, and Xiaomi. It's often seen as the Hong Kong equivalent of the NASDAQ index, focused on technology and innovation.

• $CAM CSI300(03188)$ This ETF offers direct exposure to China’s domestic market by tracking the CSI 300 Index, which includes the 300 largest and most liquid A-share companies listed in mainland China. This is a great way to invest in China's economic growth while diversifying your portfolio across multiple sectors.