Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

China: light at the end of the Covid tunnel?

Hoshang Daroga CFA, Investment Director at Elston Consulting, looks at the easing of Covid-19 restrictions in China.

China was ground zero for the Covid-19 pandemic three years ago. The complex web of restrictions have choked off growth. Their end has been a long time in coming and eagerly anticipated by the China markets. A shift in the tone of policymakers at the start of November prompted speculation of an easing of restrictions, immediately sending China-related equities higher.

Those rumours were quashed, but then at the end of last week the government issued a 20-point playbook aimed at easing domestic virus mitigation measures and reducing the country’s position of global isolation. Among other things, quarantine has been cut for travellers into China and the local contact tracing regime has been overhauled.

Chinese equities listed on the Shanghai (A-share) and Hong Kong (H-share) markets have posted strong gains as a result, also supported by a raft of directives aimed at supporting the country’s beleaguered property sector.

Finally, the issues faced by the US and Europe – including high energy prices, rampant inflation and quantitative tightening – are less acute in China.

For those turning positive on China, there are a number of implementation options.

What are the options?

  • For A-shares: HSBC MSCI China A Inclusion UCITS ETF tracks China A-Shares that are also included in the MSCI Emerging Markets index. Physical replication, 0.30% TER, largest holding of 500 is Moutai (6.15%).
  • For H-shares: iShares China Large Cap UCITS ETF (LSE:FXC) tracks the FTSE China 50 index which represents the 50 largest and most liquid Chinese companies listed on the Hong Kong Stock Exchange (H-Shares, Red Chips and P Chips). Physical replication, 0.74% TER, largest holding of 50 is Meituan Dianping (9.2%).
  • For A&H shares combined: Xtrackers MSCI China UCITS ETF 1C (LSE: XCX6) tracks the largest and most liquid Chinese stocks (A shares, H shares, B shares, Red chips, P chips). Physical replication, 0.65% TER, largest holding of 667 is Tencent Holdings Ltd (12.4%).

China’s zero-Covid-19 strategy has been a policy cornerstone since the pandemic began and is therefore likely to be dismantled slowly. Political power is concentrated and policymaking is guarded but for an economy as large and influential as China’s, even these small steps can have a significant effect.

Notices

All ETFs mentioned are London-listed ETFs and available on the IG share dealing platform.

Your capital is at risk. The value of shares, ETFs and ETCs can fall as well as rise, which could mean getting back less than you originally put in.

The views and comments are the author’s own and do not constitute a personal recommendation, advice or marketing communication.

This is not an offer of, or solicitation for, a transaction in any financial instrument. Neither the author nor IG accept responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information.

Consequently any person acting on it does so entirely at their own risk.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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