A new report says that assets under management in Chinese exchange-traded funds (ETFs) have more than doubled in three years.
FXI – Daily Chart
FXI is a popular large-cap China ETF listed on the US stock market. The fund has critical resistance in the form of a downtrend line that can allow further repair from the market downturn.
Market data expert Morningstar issued the report, saying that assets had more than doubled to $1.8 trillion. Despite any fluctuations in the market, foreign investors see an opportunity for long-term investment.
ETFs have also grown in popularity in the United States after investors grew tired of managing their portfolios with single stocks. A boom in meme stocks led to losses in stocks like AMC, while stocks like Tesla have also played out their sector-based slowdowns.
Investors see ETFs as a chance to invest in a mix of sectors, and with US stocks at record highs, Chinese equities offer a long-term alternative.
According to the report, equity ETFs drove the surge in Chinese investment, accounting for around 94% of total ETF AUM in China at the end of 2023. Annual inflows to China ETFs also jumped nearly fivefold, from 127.2 billion yuan in 2021 to 604.3 billion yuan in 2023.
That was driven by the rebound in China’s economy this year, and inflows surged from deep losses in 2023.
“Equity ETFs gained immense traction over the past three years, with inflows and AUM at record highs,” the report stated. “The annual inflows in 2023 far exceeded the total inflows in the four years between 2019 and 2022.”
The report added that two categories – considerable equity, technology, and communications – topped the chart, making up over 40% of all equity ETF assets. Broad-based index trackers like CSI 300 ETFs were targets for strong institutional inflows, while thematic tech ETFs also attracted assets.
The report concluded that fixed-income ETFs have developed slower, with only 17 products on the market by the end of 2023. However, short-term bond ETFs were growing in demand due to equity market volatility.
