China ETF Rises as Retail Sales Ease Economic Slowdown Concern

Updated on
  • Retail sales increase in 11% in October, beating estimates
  • Alibaba's Ma says next 5-15 years will be good for China

The largest U.S. exchange-traded fund tracking A shares rose to a three-month high after retail sales data provided signs to investors that accelerating consumption is helping offset a slowdown in China’s industrial economy.

The Deutsche X-trackers Harvest CSI 300 China A-Shares ETF rose 0.3 percent to $38.30 in New York on Wednesday. The Bloomberg China-U.S. Equity Index was little changed while American depositary receipts of Baidu Inc., China’s biggest search engine, increased 1.3 percent to $199.49. The Shanghai Composite Index slipped 0.2 percent at 10:01 a.m. on Thursday, as technical indicators signaled shares are approaching overbought conditions after rallying for five out of the past six days.

Better-than-expected retail sales in October underscored a shift in the economy toward greater reliance on consumer spending as traditional growth engines in the manufacturing and construction sections falter. Jack Ma, chairman of Alibaba Group Holding Ltd., said in a Bloomberg Television interview on Wednesday that even if China’s economy faces challenges in next five to 15 months, it will be “good times” over five to 15 years.

Changing Narrative

“The narrative is shifting to ‘rebalancing is gaining momentum’ from ‘the collapse is coming,’ so the risk may be viewed to the upside if data like 11/11 and auto and retail sales strengthen,” Peter Halesworth, founder of Heng Ren Investments, whose firm invests in Chinese stocks, said in an e-mailed reply.

Wednesday’s data showed retail sales rose 11 percent in October beating the median economist projection of 10.9 percent in a pickup paced by an acceleration in auto sales. Meanwhile, China’s property-development investment growth slowed to 2 percent from a year earlier in the ten months through October. Industrial output last month also trailed estimates.

Transactions through Alibaba during the annual Singles’ Day shopping event on Nov. 11 passed 57.1 billion yuan ($9 billion) before midday, eclipsing last year’s record with 12 hours still to go. Alibaba shares fell 1.9 percent to $79.85 amid speculation that the earnings impact from the sales has already been priced into the shares after they soared almost 50 percent from a low in September, according to James Cordwell, a London-based analyst at Atlantic Equities.

NetEase Inc. jumped 2 percent to $150.07, the highest since July 23. China Lodging Group Ltd. added 1.1 percent to $29.49 after revenue in the third quarter beat estimates.

President Xi Jinping said on Tuesday China will speed up reforms to boost economic growth, including stepping up policies to improve the efficiency of the nation’s bloated state-owned companies.

Pheonix New Media Ltd. lost 4.3 percent to $4.69 after it gave a lower-than-expected sales forecast.