China Stabilization Signs Lure U.S. Traders Back to A-Share ETF

Updated on
  • Deutsche X-trackers Harvest CSI 300 ETF grows by $36 million
  • GDP expands about 6.85% in November, near government target

U.S. traders are adding money to the biggest exchange-traded fund tracking mainland Chinese stocks for the first time in two months on mounting signs that the economic slowdown is stabilizing as the government pledges to do more to support growth.

Investors added a net $36 million to the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF in the six trading days through Monday, the first inflows since the end of October. Short interest has declined to 19 percent of outstanding shares from a record 38 percent on Dec. 9, according to data compiled by Bloomberg and Markit.

The turnaround comes as growth in the largest developing economy is picking up. Bloomberg’s monthly China gross domestic product tracker accelerated to a 6.85 percent estimated growth pace for November, the fastest since June and approaching the government’s target of 7 percent. Measures of industrial production, retail sales and fixed-asset investment all exceeded forecasts this month. Officials also indicated that they will take further steps to bolster expansion after the Central Economic Work Conference.

“The healthy portion of the economy may be starting to benefit from lower funding costs,” Michael Shaoul, who oversees about $3 billion in assets, including Chinese stocks, as chief executive officer of Marketfield Asset Management LLC, said by phone from New York on Tuesday. “We’d like to pick our spots.”

Monetary policy must be more “flexible” and fiscal policy more “forceful” as leaders create “appropriate monetary conditions for structural reforms,” according to statements released at the end of the government’s economic conference. The central bank has already taken steps including a currency devaluation in August and six interest-rate cuts since November 2014 to cushion the impact of an economy slowing to the weakest pace in 25 years.

China’s GDP expansion will probably expand 6.9 percent this year before decelerating to 6.5 percent in 2016 and 6.3 percent in 2017, according to the median estimate of economists surveyed by Bloomberg. Growth peaked at 14.2 percent in 2007.

Shares in the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF added 0.9 percent to $28.41 in New York Tuesday, extending their gain from this year’s low in August to 21 percent. A Bloomberg gauge of the most-traded Chinese stocks in the U.S. increased 0.7 percent to 129.34, ending a two-day decline.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE