Recently, a wave of passive investments has been flowing into Chinese assets, even as some hedge funds shift their strategies. The Chinese market has rebounded, with significant capital inflows leading to substantial growth in certain Chinese stock ETFs. Notably, the largest U.S.-listed Chinese stock ETF has surpassed $10 billion, currently at $10.58 billion, marking a historic milestone.
This influx is the first time a U.S.-listed Chinese stock ETF has broken the $10 billion mark, a feat not achieved during previous Chinese stock market booms in 2015, 2019, or 2020. Since the announcement of a policy package aimed at stabilizing markets and supporting economic growth on September 24, the iShares China Large-Cap ETF (FXI, Financial), managed by BlackRock, has seen a net inflow of 43.5 billion yuan.
FXI tracks the FTSE China 50 Index, covering the largest and most liquid stocks listed in the Hong Kong market. From September 23 to October 10, FXI recorded net purchases totaling $6.151 billion, with its scale reaching $10.58 billion. Its top holdings include major companies such as Meituan, Alibaba, Tencent, JD.com, China Construction Bank, Xiaomi, Ping An Insurance, BYD, Bank of China, and Industrial and Commercial Bank of China.
The largest U.S.-listed Chinese stock ETFs include FXI, KWEB (tracking the China Internet Index), MCHI (tracking the MSCI China Index), ASHR (tracking the CSI 300 Index), and YINN (leveraged three times on the FTSE China 50 Index). Their respective sizes as of October 10, 2024, are $10.58 billion, $7.42 billion, $6.25 billion, $2.96 billion, and $2.48 billion.
Globally, investors have accelerated their purchases of Chinese stock ETFs. From the policy announcement to the most recent trading session, the five largest U.S.-focused Chinese ETFs reported nearly $4.6 billion in inflows. Chinese stock-related ETFs in markets such as the UK, India, the Middle East, and Japan also saw significant gains, with Japan’s A-share ETF soaring 1572%.
Market analysts suggest that funds that had previously exited Chinese stocks for Japan and Southeast Asia might be returning. Data from TrackInsight indicates that over twenty U.S.-listed Chinese ETFs achieved double-digit returns over a week, outperforming over 3,000 other U.S.-traded ETFs.
Furthermore, Roundhill Investments has launched a new ETF, China Dragon, focusing on the nine largest and most innovative Chinese tech companies, including Meituan, Xiaomi, BYD, JD.com, Tencent, Pinduoduo, Alibaba, Baidu, and NetEase. Within two days of its launch, this ETF drew $35 million in net inflows.
