The scale of equity ETFs has exceeded 3 trillion yuan! Open an account immediately and keep up with the trend
Foreign capital is crazily pouring into Chinese asset ETFs listed on the US stock market.
Recently, Chinese assets have experienced a significant rebound, with some Chinese asset ETFs listed on the US stock market rapidly expanding in size, indicating that foreign investors are also buying up Chinese assets with real money.
In just a few days, multiple US stock ETFs such as FXI and ASHR, which invest in Chinese assets, have reached historic highs in their latest shares, reversing the previous situation of continuously shrinking size. Among them, FXI's scale exceeded 10 billion US dollars for the first time in history on October 9th.
The largest Chinese asset ETF in the US stock market has doubled in size
In this round of China's asset rebound, ETFs are the biggest winners both domestically and overseas. With obvious advantages such as flexible trading, low fees, transparent positions, and diversified investment portfolios, ETFs have become an important tool for domestic and foreign investors to jointly pursue Chinese assets.
FXI (iShares China Large Cap ETF) is a Chinese asset ETF issued by iShares, a subsidiary of global asset management giant BlackRock. This ETF is currently the largest ETF in the US stock market that tracks Chinese assets, with a size of $10.861 billion as of October 11, 1.7 times the size on September 23, and an increase of $6.862 billion in size during this period. On October 9th, the scale of FXI exceeded 10 billion US dollars for the first time in history.
It is worth noting that the net asset value of FXI funds is still in the historical low range, only 60% of the fund's net asset value in January 2021. The growth of FXI's scale is mainly due to the contribution of share growth. The market share has rapidly expanded since September 26th, with a 1.26-fold increase in just 12 trading days. The latest market share reached 325 million, the highest value since the ETF's listing. The recent rapid growth rate of market share is also the fastest since its listing.
FXI tracks the FTSE China 50 Index, which covers the 50 largest and most liquid stocks listed on the Hong Kong market. As of October 10th, the top ten heavily held stocks disclosed by FXI include Meituan, Alibaba, Tencent Holdings, China Construction Bank, JD.com, Xiaomi Group, BYD, Ping An, Bank of China, Industrial and Commercial Bank of China, and others listed on the Hong Kong Stock Exchange. The top ten heavily held stocks account for 59.39% of the weight of the index.
Looking back at the changes in FXI's market share before this significant surge, the ETF has been continuously favored by funds since its listing, with its market share reaching new highs and reaching its peak on July 30, 2009, with a market share size of 268 million shares at that time. For 15 years since then, FXI's market share has never reached this high level.
The last significant increase in FXI's share occurred between June 2020 and May 2023, during which FXI's share achieved a growth of 1.52 times. At that time, China's core assets and track stocks rebounded one after another, and domestic assets also performed well.
Since May 2023, FXI's market share has continued to decline and reached a temporary low on September 25th.
The significant surge in FXI's market share indicates that overseas assets are buying Chinese assets in real money. The attitude of foreign investors towards FXI has shifted from pessimistic selling to active buying, mainly due to the frequent warm winds of domestic policies.
Hua'an Fund previously stated that on September 24th, the State Council Information Office held a press conference, where leaders from various departments announced a series of policies to support the real economy, real estate, and capital markets. The policy intensity has significantly increased, exceeding market expectations. On September 26th, the Politburo held a rare meeting to discuss issues related to "economic work", reflecting the high level of attention given to economic work by the highest level. The meeting put forward the principle of "taking action first, working together as one, fully stimulating the enthusiasm, initiative, and creativity of the whole society to promote high-quality development, and promoting sustained economic recovery and improvement", reflecting the policy's confidence and determination to stabilize the economy. And September 26th happened to be the recent low point of FXI's market share.
Foreign investors crazily rush to buy Chinese assets
Judging from the subscription situation of ETF shares, it is not an exaggeration to describe foreign net purchases of Chinese assets as crazy buying. In just a few days, the latest shares of multiple ETFs such as FXI and ASHR have reached historic highs.
In addition to FXI, the ETFs tracking Chinese assets with large scale listed in the United States also include KWEB (KraneShares CSI China Internet ETF), MCHI (iShares MSCI China ETF), ASHR (Xtrackers Harvest CSI 300 China A-Shares ETF), YINN (Direxion Daily FTSE China Bull 3X Shares). The four ETFs track China Internet Index, MSCI China Index, Shanghai Shenzhen 300 Index, and the FTSE China 50 Index.
As of October 10th, KWEB has a scale of 7.55 billion US dollars. As of October 11th, the scale of MCHI was 6.595 billion US dollars, an increase of 2.193 billion US dollars or 50% compared to the scale on September 23rd.
Unlike other ETFs that mainly invest in Chinese targets listed in Hong Kong and the United States, ASHR is one of the few ETFs in the US stock market that can directly invest in A-shares. This index covers the 300 largest and most liquid listed companies in the Shanghai and Shenzhen stock markets, representing the overall performance of China's A-shares market and is welcomed by funds for its direct coverage of the A-share market. The latest scale of ASHR is 3.38 billion US dollars, an increase of 2.305 billion US dollars compared to the scale on September 23, with a growth rate of 1.15 times. The latest market share of ASHR is 122 million shares, also setting a new historical high.
Since September 24th, the Chinese asset market has been exceptionally hot, with multiple indicators creating history. The A-share market has swept away its decline and achieved a significant reversal. Morgan Stanley Fund believes that the direct cause is the intensive catalysis of heavy policies, and the fundamental reason is underestimation and underallocation. Recently, overseas funds have significantly increased their allocation to Hong Kong stocks and A-shares, and the transaction volume of northbound funds has significantly increased. It is expected to show a significant net buying trend. After the "9.24" new policy, overseas funds' preference for Chinese assets has increased.
The current market is still in the policy driven stage, and domestic policies have been continuously introduced in the past two years. Why is the impact of this policy on the market so great? Morgan Stanley Fund analysis shows that firstly, the level of this policy is very high, belonging to the super combination punch, and the strength is beyond expectations, involving capital market policies, real estate policies, and monetary policies. The "924 New Policy" supplements the direction of fiscal policies, livelihood policies, and other areas of concern for people's livelihoods and other investors. Secondly, the current overseas environment is different. The Federal Reserve launched a rate cut on September 19th, and the magnitude of the cut exceeded market expectations. Against the backdrop of the Fed's rate cut, the pressure on the RMB exchange rate eased and appreciated, which laid a good foundation for the return of overseas funds. Finally, the A-share market experienced more than three consecutive months of decline before the market started, and the index almost returned to the low point of early February, with a significant improvement in cost-effectiveness.