CXSE ETF

By Christopher Gannatti Key Takeaways August and September 2024 saw dramatic shifts in Japan and China's equity markets, with Japan's policy communication triggering a market spike up in the yen and down in equities, and China's stimulus leading to a rally—showing how quickly policy can reshape returns.

Interest rate cuts and plans for fiscal stimulus are the primary reasons why Chinese stocks have rallied of late. Over the past month, the MSCI China Index is higher by almost 20%.

Last week, China stocks and related ETFs delivered scintillating performances. That was due largely to fiscal and monetary measures that show Beijing is serious about propping up the its economy.

Major ETFs tracking mainland shares in China have experienced significant declines due to pressure from the country's authoritative regime. WisdomTree China ex-State-Owned Enterprises Fund offers exposure to Chinese companies excluding state-owned enterprises, aiming to outperform other broad China funds. Despite poor sentiment and the perception of China as "uninvestable," signs of a capitulation bottom and attractive valuations suggest a potential turnaround for China stocks.

Following disappointing showings in 2023, China stocks are commanding attention as emerging markets rebound candidates in 2024. Professional investors are expecting an equity market recovery in the world's second-largest economy could be broad-based.

This has been a trying year for investors with exposure to Chinese equities. As of November 21, 2024, the widely followed MSCI China Index was down 7.6% year-to-date while the MSCI Emerging Markets Index was higher by 5.3%.

The MSCI China Index is lower by 7% over the past month, confirming that global investors are pensive about the state of affairs in the world's second-largest economy. Near-term Chinese stock declines will likely chasten some market participants, particularly those long frustrated by lagging performance by the broader emerging markets universe.

Amid growing concerns that China's economy is rapidly softening, the MSCI China Index slipped 5.50% last week. Predictably, that decline sparked similar results for various Chinese stocks and exchange traded funds, likely spooking some investors in the process.

While the U.S. economy remains stubbornly hot, much to the Fed's chagrin, China's may be sputtering. The massive Chinese economy saw key indicators slow down in July, but that didn't slow down interest in China ETFs.