Chinese stocks are the hot new asset class, despite double-digit losses every year since the end of the Pandemic. The MSCI China Index jumped 20% in 2024,* matching S&P 500 gains. Reason: Beijing policymakers unleashed a stimulus package to revitalize growth in the world’s second-largest economy. The government pledged to pump $114 billion into its stock markets, slash interest and mortgage rates, and lower the amounts major banks are required to hold in reserve. Hedge fund legend David Tepper declared now is the time to buy “everything” in China because many companies are trading at dirt-cheap prices despite solid growth potential.
My take: China’s stimulus bazooka could provide a short-term jolt and extend the rally in Chinese stocks. But China is beset with systemic problems that government spending won’t fix. These include President Xi Jinping’s crackdown on private enterprises…a shortage of young workers after decades of China’s “one-child” policy…and a collapsed real estate market with about 90 million housing units standing empty.
Aggressive investors who want to bet on China’s recovery should use diversified exchange-traded funds (ETFs) and make strategic purchases during pullbacks and sell-offs. ETFs to consider…
iShares MSCI China ETF (MCHI) holds a diversified portfolio of about 600 stocks geared toward Chinese blue chips. Recent share price: $46.48.
KraneShares CSI China Internet ETF (KWEB) targets sectors of the Chinese economy likely to outperform such as e-commerce, electronic payments and cloud computing. It invests in about 30 of China’s tech giants including Alibaba, Baidu and Tencent. All offer free cash flow and solid balance sheets and are undervalued relative to their US counterparts. Recent share price: $29.85.
*All performance figures, from Morningstar, Inc., are through November 22, 2024.
