Chinese ETFs Fizzle During Pre-Market Despite US Investors Pouring $5.2B Last Week: Here's What Happened

The much-anticipated announcement of plans to stimulate China’s flagging economy failed to meet investor expectations, causing a short-lived stock market rally.

What Happened: After the Golden Week holiday, shares surged by over 10% as trading resumed. However, the excitement was fleeting. The Shanghai Composite Index in mainland China ended the day 4.6% higher, while the Hang Seng in Hong Kong fell by 9.4% after a press conference by China’s economic planners, as per a report by the BBC on Tuesday.

Investors were left seeking more specifics on how the government plans to stimulate economic growth.

This comes after investors poured $5.2 billion in new assets last week following Beijing’s announcement of stimulus measures, Reuters reported on Tuesday

Data from Morningstar reveals that the $5.2 billion inflow for the week ending Oct. 4 contrasts sharply with an average weekly outflow of $83 million in 2024. This also marked the largest one-day rally in Chinese stocks since 2008.

Funds like Blackrock’s iShares China Large-Cap ETF FXI and KraneShares CSI China Internet ETF KWEB saw significant inflows. However, as per Benzinga Pro, on Tuesday during the pre-market hours, FXI was trading 8.37% lower while KWEB was down by 10.14%.

Similarly, iShares MSCI China ETF MCHI was down by 10.59% while Franklin FTSE China ETF FLCH was 9.26% down.

See Also: What’s Going On With Futu Holdings’ Stock?

Why It Matters: The recent surge in Chinese stocks has been described as a “fast and furious rally,” with the MSCI China Index climbing over 35% between Sep. 24 and Oct. 7. This rally has outpaced other major global markets and more than doubled the year-to-date gains of the S&P 500. The rise has been fueled by aggressive monetary easing policies and renewed government efforts to stabilize the property sector.

However, the Chinese government’s recent announcement of a 200 billion yuan ($28 billion) stimulus aimed at local investment projects fell short of market expectations, leading to a sharp sell-off in major tech stocks. Despite this, officials remain confident in achieving economic and social development goals, as stated by Zheng Shanjie, chairman of the National Development and Reform Commission.

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Disclaimer: This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.

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