iShares MSCI China A ETF

CNYA

Market cap $270M

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.

iShares MSCI China ETF offers broad exposure to China's economy, positioned to benefit from the country's accelerated technological independence. US-led restrictions on Chinese tech have backfired, fueling domestic innovation and an acceleration toward a value-added, knowledge-based economy. CNYA is preferred over tech-specific ETFs, as China's tech boom is expected to drive growth across multiple sectors, not just technology.

CNYA offers diversified exposure to China's domestic A-share market, with strengths in tech and industrials but heavy financial sector weighting. Short-term risks remain due to China's property market struggles and global trade tensions, making the outlook too uncertain for a buy recommendation. Government stimulus and strong projected GDP growth (4.8% in 2025) support long-term opportunities, especially in EVs and infrastructure.

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.

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China's economic resilience and innovation, particularly in AI, support a positive outlook for BlackRock's iShares MSCI China A ETF. CNYA grew 14.5% over the last year but lags behind the S&P 500 over five years, highlighting the growth potential. Green shoots are seen in the beleaguered property market.

Sentiment remains fragile in China and Hong Kong stock market even China services activities have improved in December. Weak market breadth and a persistent bearish trend of the Chinese yuan since November has added to more woes to the Hang Seng Index.

CNYA offers wide diversification with 433 different A-share positions, but comes with a higher expense ratio of 0.6% and a relatively high P/E ratio of 16.26 compared to H-shares. A-shares often trade at a premium compared to H-shares, leading to lower dividend yields and higher risks, which should be a concern for investors. Despite its diversification and exclusion of ADRs and VIEs, CNYA holds some overpriced assets, making it a decent but not ideal long-term investment.

China's stimulus plan head lead to big fund flows in ETFs. The trend towards private asset ETFs continues to gain steam.

Data largely came in weaker than already cautious forecasts, and with a less supportive base effect, we will need to see a significant stimulus push to reach this year's growth target. Looking at the output of industrial products, we can see the clear impact of the property market decline play out.