The wave of regulation in China leads to high turnover in ETFs tracking China's equities. Developed market ETFs remain in demand, cryptocurrency ETNs are sometimes bought, sometimes sold.
24 August 2021. FRANKFURT (Börse Frankfurt). The significant price losses on China's stock exchanges in recent weeks and months are also driving ETF investors. Turnover in China ETFs is high, but there is buying and selling. "Some are despairing, others see it as an opportunity and get in," reports Andreas Schröer of Lang & Schwarz. The trader reports high turnover for the Xtrackers MSCI China (LU0514695690), for example.
Since the beginning of the year, it has lost 13.4 percent in value. The return on a three-year view has shrunk to 4 percent annually. By contrast, the top-selling Xtrackers CSI 300 Swap (LU0779800910) is still up 3.3 percent since the start of the year, and has gained 22.6 percent a year in recent years.
The MSCI China tracks large and mid-cap stocks, including renminbi-denominated stocks traded in Shanghai and Shenzhen (A-shares), mainland stocks traded in Hong Kong (H-shares), foreign-currency stocks traded in Shanghai or Shenzhen (B-shares) and stocks listed on foreign exchanges (ADRs). With 730 index members, the index covers about 85 percent of China's equity universe. The CSI 300, on the other hand, contains only the 300 largest renminbi A-shares traded in Shanghai and Shenzhen.
Emerging market ETFs in the wake of China turbulence
According to Schröer, emerging market ETFs, such as the Vanguard FTSE Emerging Markets (IE00B3VVMM84), are also heavily traded due to the news from China. That, too, has lost a lot of ground in recent months, but is still in the black, up 3.5 percent since the beginning of the year.
China's regulators are increasingly intervening in the market: After China's technology sector with Alibaba & Co was already targeted in October last year, private tutoring companies - a big business in China - were banned in July this year. The real estate sector is under growing scrutiny.
According to fund company DWS, such advances are not expected to end soon, but they are not all bad either: "In the short term, the interventions may hurt, but in the long term they could increase stability." Regulation should be seen in the context of the reorientation of economic policy, which aims for more balanced growth and greater social equilibrium, he said.
China and sustainability - that doesn't really go together for many investors. But investors can increasingly focus on China and sustainability at the same time. At the end of July, BNP Paribas launched a new product on Chinese equities selected according to SRI criteria: the BNP Paribas Easy MSCI China Select SRI S-Series 10% Capped in euros (LU2314312849) or U.S. dollars (LU2314312922). The provides access to large and mid-cap Chinese companies that have the best ESG profile within their industry according to the best-in-class approach. The UBS MSCI China ESG Universal (LU1953188833), which also tracks Chinese equities, is older. ESG-compliant Chinese bonds are covered by the L&G ESG China CNY Bond (IE000F472DU7IE00BLRPQL76).
Constant interest in world ETFs
Meanwhile, developed market ETFs remain in demand. Schröer reports continued high demand for classic ETFs such as MSCI World, but also DAX trackers. The DAX has recovered after its short setback last week and stands at 15,905 points at midday on Tuesday. On the U.S. stock markets, the recovery that began on Friday has continued, S&P 500 and Nasdaq even climbed to new record highs.
Active cryptoinvestors
Schröer also reports continued high turnover for cryptocurrency ETNs. "There continues to be a lot of real turnover in both directions." Since mid-July, the bitcoin price has risen again, currently at $49,747. Previously, the price had halved from its all-time high of $64,749 in April to around $30,000 in July.
Shares | |
China | Buys/Sales |
Emerging Markets | Buys/Sales |
World | Buys |
Germany | Buys |
Cryptocurrency-ETNs | Käufe/Verkäufe |
by Anna-Maria Borse
24 August 2021, © Deutsche Börse AG