In 2024, Chinese stocks finally rebounded from challenges like the pandemic, property market struggles, and weak consumer confidence, ditching a three-year losing streak despite a slight dip on the final trading day.
The CSI 300, which tracks major companies in Shanghai and Shenzhen, climbed 14.7% last year, while the Shanghai Composite Index gained 12.8%.
In Hong Kong, the Hang Seng Index jumped 17.7% for the year, clocking its first annual gain in five years. Analysts at Value Partners, as reported by Reuters, attributed the rally to stronger-than-expected policy support from Chinese authorities, including interest rate cuts, property incentives, and funding programs to boost stock buying.
Banking stocks stood out as top performers in China, increasing 34.7%, with the biggest state banks soaring to multi-year highs. The chip sector’s growth is also worth mentioning, moving 53.9% northward as investors leaned into domestic semiconductor firms amid U.S. restrictions.
Interestingly, according to Reuters, strategists suggest that the market is nearing the end of “policy expectation-driven” trading, with optimism about continued dividends in 2025 despite potential disruptions from U.S. political changes.
Also, taking into consideration what China President Xi Jinping said in his annual new year’s eve speech, China's GDP is likely to grow around 5% in 2024, meaning it is set to meet its official target. Jinping also mentioned continued economic support measures and more proactive macroeconomic policies for 2025.
Now that we have briefly examined what China’s future holds, let’s look at how some Chinese stock-focused ETFs are poised to perform.
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Franklin FTSE China ETF FLCH is an underdog among China-focused ETFs, with $145.27 million in assets under management. According to Franklin Templeton, FLCH "provides access to the Chinese stock market, allowing investors to precisely gain exposure to China at a low cost," with targeted exposure to large- and mid-sized companies in China.
The low 0.19% expense ratio is a relief for investors outside China, as investing in Chinese stocks is expensive. Tencent Holdings TCEHY holds the biggest piece of the holdings pie, with 14.38% allocation, followed by Alibaba Group Holdings BABA. The fund has generated 15.03% returns in 2024.
iShares MSCI China ETF MCHI has around $5.4 billion in AUM, a much bigger ETF than FLCH in volume, with an expense ratio of 0.59%. Despite the expense ratio being on the higher side, the fund has grown 21.11% in 2024, reflecting positive demand among investors. Coincidentally, this ETF also allocates the biggest chunk of its holdings (16.59%) to Tencent, and the second largest piece (8.13%) to Alibaba.
iShares China Large-Cap ETF FXI, as the name suggests, focuses on Chinese blue-chip stocks, and has an AUM of $7.1 billion. The high-end expense ratio of 0.74% did not deter investors from rushing into the fund, pushing the price up by 23.31% through 2024. The fund provides exposure to 50 of the largest Chinese stocks in a single portfolio, offering broad coverage of major companies.
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