KraneShares CICC China 5G and Semiconductor Index ETF

KFVG

Market cap $7.92M

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.

The Shenzhen A shares index, a bellwether of mainland Chinese equities, is down 32 percent from its 2-year high set in February of last year. China's demographic problems begin and end with its dependency ratio - the number of retirees relative to the working population.

Chinese companies are being encouraged to return cash to shareholders - and are finding good reasons to do so. Regulators are encouraging companies to focus on shareholder returns, and changing macroeconomic conditions are making it easier for Chinese companies to pay dividends. Given the risks, we think an active investing approach is especially important when investing in high-dividend Chinese stocks.

The latest figures published by the People's Bank of China show that credit and liquidity are stalling as demand for new loans declines. Deteriorating confidence in China's prospects explains why households prefer paying down debts while companies borrow less.

Data came in generally in line or slightly weaker than forecasts, as weak confidence continued to depress investment and consumption. New home prices fell by -0.65% MoM in July, compared to a -0.67% MoM drop in June.

China has been hit with two major crises as their financial and real estate sectors collapse simultaneously. Deflation, unemployment, divestiture, and lowered consumption are affecting all levels of society, with young, urban populations affected the most.

New aggregate financing and loans both missed forecasts again in July amid high real interest rates and limited borrowing appetite. New RMB loans fell into contraction at RMB 770.8bn, lowering the year-to-date new increase of RMB loans to RMB 12.38tn, a 20.9% YoY decline.

Wall Street was moderately upbeat last week. The tech rally mainly pushed up the S&P 500 and the Nasdaq.

The People's Bank of China kept the one-year medium-term lending facility rate unchanged at 2.5% today, in line with market expectations. We believe that in conjunction with today's data releases and the start of rate cuts in other central banks such as the European Central Bank and Bank of Canada, the odds of a PBoC rate cut in the coming months have risen.

Key economic indicators are mixed in China and, in fact, were mostly weaker than expected last month. So, policymakers are now stepping up support for the property sector in particular.