Overseas investors are eagerly investing in the Chinese market. During the National Day Golden Week, although the domestic stock market in China did not trade, Chinese assets listed overseas attracted a large amount of investment from investors.
According to Morningstar data, as of the week ending October 4th, China related assets in US exchange traded funds (ETFs) received a total inflow of $5.2 billion. This optimistic sentiment represents the affirmation of overseas investors towards China's stimulus measures launched in September, and also indicates a sharp shift in investor sentiment.
Last year, the average weekly outflow of Chinese related ETFs listed in the United States was $27 million. So far this year, the average weekly outflow of this category of ETFs is $83 million.
Michael Reynolds, Vice President of Investment Strategy at Glenmede Trust, a wealth management company in New York, said that the market has been waiting for China to make a credible commitment to economic recovery.
Jonathan Krane, founder and CEO of KraneShares, pointed out that the Chinese market had already been severely oversold. He believes that the recent surge in stock prices in the Chinese market is just the beginning, and the current influx of funds is only a small portion of global investors returning to China, which is a very early reaction.
In addition, the short-term option costs of China related ETFs in the US market climbed to a new high on Monday, indicating a strong bullish sentiment among investors towards the Chinese market. Some large traders also roll over their profitable positions to higher prices, hoping to expand their profits as the uptrend continues.
For example, the implied volatility of one month options of the $2.3 billion Xtrackers Harvest CSI 300 China A-share ETF rose to a record high, while the same indicator of the $9.3 billion iShares China Large Cap ETF (FXI) also reached the highest level since 2020, and the $8.36 billion KraneShares CSI China Internet ETF (KWEB) hit a two-year high.
Emotional transformation
According to data from Paris based data analysis company TrackInsight, over 20 Chinese ETFs listed in the United States achieved double-digit returns within a week, with gains ranging from 10-28%, outperforming more than 3000 other ETFs traded in the US market.
Among them, the largest Chinese concept ETF in terms of investment scale is BlackRock's iShares China Large Cap ETF. According to Morningstar's statistics, the inflow of funds into this ETF reached $2.7 billion last week.
Michael Barrer, Head of ETF Capital Markets at Matthews Asia, an asset management company, stated that when the market experiences such significant and drastic volatility, index linked products will be the first to see capital inflows.
Some American institutions have taken a different approach. Roundbill, an American investment consultancy, recently launched an ETF called Chinese Loong, focusing on nine of China's largest and most innovative technology companies, including Meituan, Xiaomi, BYD, JD, Tencent, Pinduoduo, Alibaba, Baidu and Netease. According to Dave Mazza, the CEO of the company, the ETF attracted a net inflow of $35 million in the first two trading days after its listing.
Mazza insists that in the near future, the situation will completely change and China will once again become a country worth investing in globally.