(Bloomberg) -- Money managers plowed cash into exchange-traded funds that buy Chinese stocks last week as a wave of fresh stimulus measures in the Asian giant boosted confidence in the country’s battered stock market.
Inflows to U.S.-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $3.87 billion last week — the biggest weekly inflow since December. Four leading ETFs that invest in Chinese stocks received about $1.44 billion in cash, the most since 2022.
Among those funds, the KraneShares CSI China Internet Fund and Xtrackers Harvest CSI 300 China A-Shares ETF recorded $516 million and $497 million of inflows, respectively. The iShares China Large-Cap ETF also saw a rebound of inflows, totaling $271 million last week, while the iShares MSCI China ETF received over $160 million.
“The strong recent net inflows into China ETFs is a sign of optimism that the government’s stimulus efforts could result in stock market gains,” Todd Rosenbluth, head of research at TMX VettaFi.
Chinese stocks extended one of their most remarkable turnarounds in history on Monday, soaring for a ninth straight day as traders rushed to buy shares in the last session before a week-long holiday. The CSI 300 Index jumped 8.5% today, the most since 2008.
The extended rally came after three of China’s largest cities relaxed rules for homebuyers, while the central bank also moved to lower mortgage rates. The latest measures were among the key elements of a sweeping stimulus package released last week that also included interest rate cuts, freeing-up of cash for banks and liquidity support for stocks.
“The rebound is entirely related to the much greater than expected stimulus measures from the PBOC and fiscal authorities,” said Dennis DeBusschere, president of 22V Research and chief market strategist. “The much stronger than expected stimulus has started to improve sentiment toward Chinese markets.”
The euphoria has brought back investors who had been underweight China for most of the year. Chinese ETFs had seen weeks of outflows before recording inflows over the past week.
And the impact has been spreading globally, fueling risk-on sentiment across the developing world. The latest measures to ease rules for homebuyers also sent commodities higher on Monday, with iron ore jumping almost 11% as investors bet that China’s efforts to ease property woes will improve demand from the world’s top consumer of the steel-making ingredient.
“The ferocity of the stock market rally is perhaps more a measure of just how beaten up expectations were rather than how transformative the stimulus package, on its own, will be for the fundamentals of the economy,” said Hasnain Malik, emerging market equity strategist at Tellimer in Dubai.
- Stock ETFs expanded by $3.7 billion.
- Bond funds rose by $169.4 million.
- Total assets rose to $375.1 billion from $353 billion.
- The MSCI Emerging Markets Index closed up 6.2 percent from the previous week at 1,174.52 points, the highest level since Mar 01, 2022.
- China/Hong Kong had the biggest inflow, of $2 billion, led by KraneShares CSI China Internet.
- Bangladesh had the biggest outflow, of $7,141, following withdrawals from iShares Frontier and Select EM.
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Following are tables detailing net flows for emerging-market ETFs in US dollars. The data include the holdings-weighted allocations from multi-country funds, as well as country-specific funds. Latest and historic flows are allocated using latest fund weightings (figures in USD millions unless otherwise stated):
Regional Summary
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Americas
Asia Pacific
Europe, Middle East & Africa
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