In recent months, particularly since September, there has been a notable surge in the assets of Chinese equity ETFs listed overseasThis increase reflects growing investor confidence in the Chinese market and its potential for robust returns.

Data compiled up until November 8 reveals that five major Chinese equity ETFs listed in the United States have collectively surpassed $28 billion in assetsThis represents a remarkable increase of approximately $14 billion since the end of August, nearly doubling their previous totalAdditionally, during October, foreign investments in Chinese equity ETFs clocked in a net inflow of around HKD 117.9 billion (approximately USD 15.2 billion), a significant uptick compared to the preceding nine months of the year.

According to Song Yu, BlackRock's Chief China Economist, the initial measures of policy support have aligned well with market expectations

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However, he believes that the ongoing support could extend beyond what many investors might anticipate in the long run.

Potential of Chinese Equity ETFs on the Rise

A report from Futu emphasizes that as of November 8, the asset sizes of five prominent overseas-listed Chinese equity ETFs — including iShares China Large-Cap ETF (FXI), MSCI China ETF (MCHI), KraneShares CSI China Internet ETF (KWEB), Invesco China A-Share ETF (ASHR), and Direxion Daily FTSE China Bull 3X Shares (YINN) — have reached an impressive total of $28.355 billionThis is a substantial jump from $14.385 billion at the end of August, marking an increase of almost 97%.

Among these, FXI stands out as the largest by asset size, having grown to $9.577 billion from $3.96 billion at the end of August

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Initially trailing behind MCHI and KWEB, FXI has achieved growth exceeding 140% since September, establishing it as a leader in this sector.

FXI tracks the FTSE China 50 Index, which includes the top 50 stocks on the Hong Kong Stock Exchange based on market capitalization and liquidityAs of November 6, its top five holdings include industry giants such as Meituan, Alibaba, Tencent Holdings, China Construction Bank, and JD.com.

In addition, the Invesco China A-Share ETF (ASHR), which incorporates A-shares traded on the Shenzhen and Shanghai exchanges, has also recorded impressive growthIts assets grew from $1.12 billion at the end of August to $3.625 billion as of November 8 — an astounding increase of 224%. As of November 7, ASHR's top ten holdings featured well-known companies such as Kweichow Moutai, Contemporary Amperex Technology Co., Ping An Insurance, China Merchants Bank, and others.

Foreign Investors Remain Optimistic About China’s Policy Support

A recent report by E Fund Management has provided a comprehensive analysis of the money flow of foreign funds into the Chinese stock market

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The findings highlighted that in October, the majority of foreign fund inflows into the Chinese stock market were channeled through passive investment vehicles, such as ETFsSpecifically, the inflow of foreign investments in Chinese equity ETFs amounted to HKD 117.9 billion (around USD 15.2 billion), greatly exceeding the average inflow levels recorded during the first nine months of the yearA deeper analysis indicated that the largest inflow originated from North America, particularly from U.Sinvestors demonstrating significant interest in Chinese equity ETFs, underscoring the allure of the Chinese capital market to overseas investorsAlthough ETF inflows from the Asia-Pacific region and Europe were comparatively smaller, they exhibited a promising upward trajectory, reflecting the growing global attention on Chinese equity ETFs.

On November 11, Song Yu expressed anticipation for the implementation of several more fiscal measures in the near future

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He noted that while the current support aligns with market expectations, the sustainability of such support could potentially exceed anticipations in the longer termFurthermore, the Purchasing Managers’ Index (PMI) data for October suggested early signs of economic recovery, with upstream prices showing signs of ascent, indicative of positive policy impacts.

Shen Yufei, Chief Equity Investment Officer at BlackRock, pointed out that looking ahead to November, the focus remains on sectors benefiting from debt reduction, high-end manufacturing that is self-sufficient, and niche industries with potential accelerated investment, alongside stable growth sectors that may present valuation shifts.

In a statement on November 6, JP Morgan emphasized that A-shares present considerable investment opportunities in the medium to long term