au en false false
 

The Chinese equity market has seen a strong growth coming into July, with CSI 300 Index and FTSE China A50 Index surging by more than 12% in a matter of days, returning to levels last seen in the 2015 bull market.


The Chinese equity market has seen a strong growth coming into July, with CSI 300 Index and FTSE China A50 Index surging by more than 12% in a matter of days, returning to levels last seen in the 2015 bull market. Banks and insurers have been the top performers contributing more than 7% month to date. The better-than-expected PMI (Purchasing Managers’ Index) data in June indicates solid recovery of business activities back to the pre-COVID level. The PMI is a measure of economic trends in manufacturing and services. A score above 50 indicates expansionary; below 50 indicates contractionary. At 30 June 2020 China’s services PMI was 58.4, as shown in the graph below.

Caixin China General Services PMI
imagetools0.png

Source: Bloomberg as at 8 July 2020

Investors have reacted very positively to the People’s Bank of China (PBOC) rate-cut policy in relending and rediscounting programs; the total margin transactions outstanding rose significantly last week and could be indicative of a forthcoming bull market, especially if levels reach the 2015 peak.

China margin trading – total outstanding balance of margin transactions (in 100 million)
imageo76g.png

Source: Bloomberg as at 8 July 2020

Over the long run, China A-shares look attractive compared to other emerging markets. China is transitioning from a manufacturing intensive economy towards a new economy focusing on financial services, technology and healthcare. In addition, the reliance on exports is gradually decreasing as a percentage of GDP as a result of resilient domestic demand. As China is gradually coming out of economic shock brought by the pandemic, there are great growth opportunities in Chinese equities.

Investors can access China A-shares by investing in an ETF that track indices like the FTSE China A50 Index or the CSI MarketGrader China New Economy Index.

Trading tip: For best practice ETF execution, use a Limit Order and trade while the China markets are open – which is currently from 12.30pm to 2.30pm (Australian Eastern Daylight Saving time) on ASX.

Published: 08 July 2020

IMPORTANT NOTICE: This information is issued by VanEck Investments Limited ABN 22 146 596 116 AFSL 416755 (‘VanEck') as the responsible entity and issuer of the VanEck Vectors Australian domiciled exchange traded funds (‘Funds’). This information contains general advice only about financial products and is not personal financial advice. It does not take into account any person’s individual objectives, financial situation or needs. Before making an investment decision, you should read the PDS and with the assistance of a financial adviser consider if it is appropriate for your circumstances. PDSs are available at www.vaneck.com.au or by calling 1300 68 38 37. The Funds are subject to investment risk, including possible loss of capital invested. The PDS details the key risks. Past performance is not a reliable indicator of future performance. No member of the VanEck group of companies gives any guarantee or assurance as to the repayment of capital, the payment of income, the performance, or any particular rate of return from any Fund.

An investment in the Funds is subject to various risks that may have the effect of reducing the value of the Funds, resulting in a loss of capital invested and a lack of income from the Funds. Chinese securities have heightened risks compared to investing in the Australian market. These risks include currency risks from foreign exchange fluctuations, ASX trading time differences, foreign laws and regulations including taxation, potential difficulties in enforcing contractual obligations, changes in government policy, expropriation, economic conditions including international trade barriers, restrictions on foreign ownership, securities trading restrictions, restrictions on repatriation and restrictions on currency conversion. No member of the VanEck group guarantees the repayment of capital, the payment of income, performance, or any particular rate of return from the Funds.

CNEW tracks the CSI MarketGrader China New Economy Index. "MarketGrader" And “CSI MarketGrader China New Economy Index” are trademarks of MarketGrader.com Corporation. MarketGrader does not sponsor, endorse, sell or promote the Fund and makes no representation regarding the advisability of investing in the Fund. The inclusion of a particular security in the Index does not reflect in any way an opinion of MarketGrader or its affiliates with respect to the investment merits of such security.

CETF is not in any way sponsored, endorsed, sold or promoted by FTSE International Limited or the London Stock Exchange Group companies (‘LSEG’) (together the ‘Licensor Parties’) and none of the Licensor Parties make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to (i) the results to be obtained from the use of the FTSE China A50 Index (‘Index’) upon which the VanEck Vectors FTSE China A50 ETF (“the Fund”) is based, (ii) the figure at which the Index is said to stand at any particular time on any particular day or otherwise, or (iii) the suitability of the Index for the purpose to which it is being put in connection with the Fund. None of the Licensor Parties have provided or will provide any financial or investment advice or recommendation in relation to the Index to VanEck or to its clients. The Index is calculated by FTSE or its agent. None of the Licensor Parties shall be (a) liable (whether in negligence or otherwise) to any person for any error in the Index or (b) under any obligation to advise any person of any error therein. All rights in the Index vest in FTSE. “FTSE®” is a trademark of LSEG and is used by FTSE and VanEck under license.