Chinese Stocks Jump Most Since 2008: ETF Winners

Chinese stocks have extended their historic rally, as government stimulus measures have tempted investors back to one of the world’s most beaten-down markets. The CSI 300 Index surged 8.5% on Monday, marking the largest single-day jump since 2008, as traders rushed to buy shares ahead of a week-long holiday, per Bloomberg, as quoted on Yahoo Finance.

China’s ten-year sovereign bonds fell on Monday, continuing their steepest weekly decline in a decade as investors shifted toward riskier assets. This reflects expectations that the government’s stimulus measures will help revive the country’s economic growth.

Technical Bull Market After Major Losses

The index, which had declined more than 45% from its 2021 peak to mid-September, has now surged more than 20%, entering a technical bull market. Last week's rally was the largest in 16 years, with continued gains as three of China’s largest cities eased restrictions for homebuyers and the central bank lowered mortgage rates. These efforts are part of a broader stimulus package that includes interest rate cuts, increased liquidity, and support for the stock market (read: A Few Reasons to Buy China ETFs Now).

Record Turnover on Chinese Bourses

Investors responded with enthusiasm, with the combined turnover on the Shanghai and Shenzhen exchanges reaching a record 2.6 trillion yuan ($371 billion) on Monday. Charu Chanana, global markets strategist at Saxo Markets, commented, “The pace of the turnaround is clearly reflective of how oversold the market was.” She expects sustainable gains in the Chinese markets this time, per Bloomberg.

Brokerages and Property Developers Lead the Rally

Brokerages led the rally, with Citic Securities Co. reaching the 10% daily upside limit due to their position as direct beneficiaries of increased stock transactions. Nearly all stocks in the CSI 300 index were up, while a Bloomberg Intelligence gauge of Chinese property developers jumped 15.7%.

Investors should note that the struggling real estate sector had posed the main challenge to China's economy in the past. Evergrande, previously the top real estate company globally, fell apart during the crisis in the Chinese property market. However, things seem to be changing for the better now.

More Rally in the Cards?

The Fear and Greed Indicator for the Shanghai Composite Index, which tracks retail investor sentiment, reached its highest level since 2020 on Sept. 30, 2024. David Chao, a strategist at Invesco Asset Management, believes that the recent surge could lead to more sustained growth due to a “complete policy shift.” The recent stimulus probably has the ability to pull China out of the economic challenges it has faced in the past three years.

China ETF Winners in Focus

Against this backdrop, below we highlight a few winning China exchange-traded funds (ETFs) of the last week.

Leveraged ETFs in Focus

Direxion Daily FTSE China Bull 3X Shares YINN – Up 55.3% Last Week

Direxion Daily CSI China Internet Index Bull 2x Shares CWEB – Up 44%

GraniteShares 2x Long BABA Daily ETF BABX – Up 38.6%  

ProShares Ultra FTSE China 50 XPP – Up 36.4%

Direxion Daily CSI 300 China A Share Bull 2x Shares CHAU – Up 33.6%

Regular ETFs in Focus

KraneShares CSI China Internet ETF KWEB – Up 21.5% Last Week

KraneShares Hang Seng TECH Index ETF KTEC – Up 20.6%

Matthews China Active ETF MCH – Up 20.6%

Global X MSCI China Consumer Discretionary ETF CHIQ – Up 19.1%

Pacer CSOP FTSE China A50 ETF AFTY – Up 19%

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