Global X MSCI China Financials ETF

CHIX

Market cap $19.8M

A lot is happening in the China ETF space these days. Product closures, market rallies, and product development are making for an interesting opportunity.

China's near-term challenges and long-term uncertainties are plentiful, but the widespread pessimism towards the Chinese economy and markets feels excessive.

The PBOC held the 1-year medium-term lending facility (MLF) rate at 2.5% in March. The PBOC remains on a dovish tilt, but depreciation pressure on the RMB limits room for monetary easing in China before global central banks start to cut rates.

China and Hong Kong markets had a humbling 2023 with equities down more than 10%. Beijing has also begun stepping up tourism and travel promotions, granting visa-free entry to 11 countries, with Singapore and Thailand the latest to be included.

The week ending in February 15 featured the Exchange conference in Miami, Florida, and launches were muted as a result. Only one new ETF made its debut during the week.

China's January CPI inflation was weaker than forecast at -0.8% YoY, which marks the lowest level since September 2009. We expect this to mark the bottom of the current cycle.

Why China May Need To Do More To Boost Investor Confidence

The Chinese economy is stabilising, but the only fireworks will come from the new year celebrations, which begin on February 11, as momentum remains weak. China's GDP growth for the fourth quarter rose from 4.9% year-on-year to 5.2%, bringing 2023 full-year growth to 5.2% YoY, exceeding the 5% growth target set at last year's Two Sessions.

While recent policy announcements and data surprises have generated some optimism, we maintain a cautious stance on China's economic prospects. We believe weak consumption trends, a downbeat labor market and continuing property sector headwinds should all weigh on the economy in the coming quarters.

Although 14 new ETFs debuted in the U.S. this past week, closure announcements came in even stronger, largely due to Global X pruning its lineup. Launches during the week included funds from BondBloxx, WisdomTree, Innovator, JPMorgan, and Range ETFs.