Following a lengthy period of underperformance, China stocks have recently shown signs of life. The asset class is winning endorsements from some professional market participants.
Should those trends continue, exchange traded funds such as the KraneShares Bosera MSCI China A 50 Connect Index ETF (KBA) stand to benefit. The ETF follows the MSCI China A 50 Connect Index. It has returned about 5.5% for the 90 days ending June 3. That confirms there is some momentum for previously downtrodden equities from the country.
KBA and China stocks at large could have some credible tailwinds. One is the fact that as U.S., India, and Japan shares rallied, China stocks mostly sat dormant or declined. That implies China stocks need to catch up to some of the markets against which they’re often compared.
Call on KBA as Pros Revisit China
Alone, the difficulty of stock-picking in the country makes KBA a compelling idea for many investors. But the ETF’s prospects could be enhanced because China stocks are gaining endorsements from some high-level market participants.
For example, in a recent interview with CNBC, Wendy Liu, JPMorgan’s chief Asia and China equity strategist, said the firm is “positive” on China equities. She added that improving EPS growth in the country’s economy could be a reason more global investors revisit the country. And reforms could play positive roles, too.
“Liu is optimistic about China’s market reform after new chairman Wu Qing was appointed as the head of the China Securities Regulatory Commission, saying that the CSRC had introduced supply side reforms,” according to CNBC.
Wu is tightening listing/delisting on mainland China while signaling commitment to prompting the country’s companies to initiate dividends. Thatcould be a long-term positive for KBA.
Perhaps adding to the case for KBA is the point that famed emerging markets fund manager Mark Mobius recently reversed his view on stocks from the country. In an interview with Enoch Yiu of the South China Morning Post, Mobius said a bottom might be in with China stocks. That could support upside from here.
“When the market reaches the bottom, you can begin to invest. Now, the Chinese market has reached the bottom. [It’s] is beginning to deliver the recovery after all the government measures to support the real estate market. We have seen light at the end of the tunnel,” Mobius told the Post.
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