[Asia Economy Reporter Oh Ju-yeon] As the Chinese stock market rallies in the new year following the People's Bank of China's reserve requirement ratio cut, China-listed exchange-traded funds (ETFs) are also heating up the market at the beginning of the year. Securities firms analyzed that "the current financial environment surrounding the Chinese stock market is similar to that of the first quarter of last year," and considering the expectations for the US-China trade agreement and the 'spring effect,' which typically shows strength in January and February, a bullish trend in the Chinese stock market is anticipated.
According to the Korea Exchange on the 3rd, the KODEX China Mainland CSI300 ETF hit a 52-week high during the trading session. After the price surged more than 30% from the 7,300 won range in January-February last year to the 9,500 won range, it fluctuated within the 10,000 won range by 1-2% throughout the second half of the year. However, it has recently broken above the 10,000 won level again in the new year, showing strength.
The KINDEX China Mainland CSI300 ETF also recorded a new 52-week high on the same day. It rose about 27% from the 16,700 won range in January-February last year to the 21,000 won range, then experienced a long sideways movement in the 22,000 won range from July to December. However, in the last four trading days, it ended this consolidation phase and turned upward, with the price rising about 3%. Considering the daily price fluctuation is usually between 0-1%, this is a stable upward trend.
The leveraged ETF, which tracks twice the index movement, showed an even larger increase. The KINDEX China Mainland CSI300 Leverage (synthetic) rose 7% over the past three trading days, from a closing price of 3,540 won on December 30 last year to 3,795 won on this day. In January-February last year, the price surged 54% from 1,965 won to 3,030 won, marking the most significant increase among China ETFs.
Securities analysts suggest that the Chinese stock market, which saw a sharp rise in the first quarter of last year, may show a similar pattern this year. First, the People's Bank of China's reserve requirement ratio cut on the 1st has raised expectations for liquidity supply, and the possibility of China's economic recovery and corporate profit rebound has increased. China's National Bureau of Statistics' Manufacturing Purchasing Managers' Index (PMI) indicates economic expansion when above the baseline of 50 and contraction when below. In December last year, it recorded 50.2, exceeding the baseline for two consecutive months. Additionally, the confirmation of the US-China Phase One trade agreement announcement date on the 15th is viewed positively as it resolves factors that had increased market uncertainty.
Park In-geum, a researcher at NH Investment & Securities, analyzed, "A recovery in the Chinese economy within the short cycle will be realized," and added, "Considering the spring effect, which shows strength in January and February, a bullish trend in the Chinese stock market is expected."
Amid this trend, China funds have shown outstanding returns compared to other overseas funds at the turn of the year. According to financial information provider FnGuide, as of the 2nd, among overseas fund returns over the past week, China funds posted the highest return at 1.58%. North American funds declined by -0.26%, and India, Japan, and Europe also recorded negative returns of -0.14%, -0.33%, and -0.21%, respectively. Vietnam and Russia showed positive growth but with modest returns of 0.37% and 0.93%. Brazil had a relatively high return of 1.49% compared to other overseas funds but still fell short of China funds.
Some expect that not only ETFs but also Chinese consumer stocks could show strength following the rise in the Chinese stock market. Lee Eun-taek, a researcher at KB Securities, forecasted, "Chinese consumer stocks such as cosmetics, leisure, and duty-free shops could continue their rally until the timing of Chinese President Xi Jinping's confirmed visit to Korea."
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