WisdomTree Trust WisdomTree China ex-State-Owned Enterprises Fund

CXSE

Valor de mercado US$ 428 mi

China's vast industrial overcapacity and weak domestic consumption threaten global economic balance and may trigger rising protectionism. Record-breaking Chinese exports face mounting global pushback, increasing risks for investors in China, especially in industrial sectors.

If advisors and investors haven't been keeping a close eye on the Chinese market recently, now may be a very good time to start doing so.  On Wednesday, President Trump headed off to Beijing for a two-day summit, marking the first time a U.S. president has visited China in nearly a decade.

Mainland investors were rare net sellers of Hong Kong-listed stocks overnight, a rare occurrence these days, totaling about $160 million. China YTD retail sales growth was stronger than expected.

The WisdomTree China ex-State-Owned Enterprises Fund ETF is rated Hold, reflecting fair valuation and mixed technicals. CXSE has underperformed over the past year, with negative alpha and weak near-term seasonality, but shows signs of bullish consolidation. The CXSE ETF is highly concentrated in Chinese tech and AI, with Alibaba and Tencent comprising 17% of assets and limited exposure to value sectors.

China stocks were among the world's top performers last year. The MSCI China Index jumped 31%, slightly trailing the 34% returned by the MSCI Emerging Markets Index.

Investors willing to make a long-term bet on China in a less risky way could find the CXSE ETF a compelling option. By excluding state-owned enterprises, the ETF focuses on businesses where shareholder returns and strong fundamentals matter the most. Yet, anti-monopoly rules, regulatory fines, or a wealth rebalance are among practices that have been and can be imposed by the Chinese government on any domestic business.

Easing tensions between China and the U.S. may be supportive of markets. Still uncertainty amid plans for Trump to visit China in 2026.

It's been a good year for international equity ETFs. As a category, broad exposure funds tapping into both developed and emerging market equities have delivered outsized gains relative to U.S. markets this year, as well as much sought portfolio diversification.

Despite mounting macro headwinds at the start of the year, Chinese equities have continued to deliver positive performance. While near-term flows can provide further upside, the durability for the equity rally will hinge on policy choices ahead.

Among APAC equity markets, Australia has a higher beta to oil prices while India, Indonesia and Thailand have lower betas. Domestic political uncertainties have been one main reason for the decoupling trend seen in Indonesia and Thailand.