WisdomTree Trust WisdomTree China ex-State-Owned Enterprises Fund

CXSE

Market cap $553M

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.

After a tumultuous period for markets in which the Trump administration raised tariffs on goods imported from China to 145%, news of an apparent deal with the Chinese government brought the tariff level down to 30% as of mid-May 2025. The S&P 500 seemed to breathe a sigh of relief at this news, turning positive year-to-date (YTD) after a significant drop in April.

By Christopher Gannatti, CFA, Global Head of Research Key Takeaways In Q1 2025, the WisdomTree Efficient Gold Plus Gold Miners Strategy Fund (GDMN) led all performers, benefiting from a capital-efficient structure that captured gains in both gold futures and gold mining equities amid persistent inflation concerns and geopolitical instability.