iShares MSCI China Small-Cap ETF

ECNS

Market cap $114M

iShares MSCI China Small-Cap ETF is rated a Strong Buy due to resilience against U.S. tariffs and attractive dividend yield. ECNS benefits from high diversification, a stable 4.5% yield, and sector exposure to less volatile industries like healthcare and industrials. Chinese companies, including the fund's constituents, are adapting to tariffs by shifting supply chains and markets, lessening the intended U.S. tariff impact.

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.

Getting emerging market exposure is a viable option in the current market environment. That's especially so given the global de-dollarization and prospect of further rate cuts by the Federal Reserve.

The iShares MSCI China Small-Cap ETF (ECNS) offers exposure to Chinese small caps but suffers from high volatility, poor tracking capabilities, and significant  underperformance. ECNS's annual turnover and volatility are much higher than typical ETFs, and its sector allocation leans heavily toward low-growth healthcare stocks. Despite a decent 4% yield and a significant valuation discount to peers, ECNS's risk-adjusted returns lag both Chinese large-caps and EM small-caps.

MCHI, with over $7B in AUM, covers around 550 Chinese stocks, most of which are giant-caps and come in varied share classes. We highlight who MCHI would be best suited for. There are some key risks associated with this ETF that investors should be aware of.

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.

Has the AI trade moved to China? Why Chinese chipmakers may soon change the semiconductor space.

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.

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.