KWEB - 5 Reasons China's Recent Stock Market Rally Is Fundamentally Different

2024-05-09 08:40:00 ET

Summary

• So far, 2024 has been a dynamic year for China’s equity markets.
• In January, a derivative-induced meltdown sent Chinese stocks lower on the Shanghai and Shenzhen Stock Exchanges, spilling over to Hong Kong and US-listed China ADRs.
• We have compiled five key points for investors to consider as to why this breakout may be fundamentally different from previous rallies.

By Brendan Ahern

So far, 2024 has been a dynamic year for China’s equity markets. In January, a derivative-induced meltdown sent Chinese stocks lower on the Shanghai and Shenzhen Stock Exchanges, spilling over to Hong Kong and US-listed China ADRs. This liquidation event was set in motion by low China equity positioning among investors. As Hong Kong and Mainland China benchmarks hit significant, round number index levels, they triggered the liquidation of index futures. With no buyer to take the other side of the trade, markets fell.

But things may be looking up for China’s stocks. Since February 2 ^nd and through the end of April, the KraneShares CSI China Internet ETF (KWEB) has returned +20.49% and the KraneShares MSCI China A 50 Connect Index ETF (KBA) has returned +17.90% versus the S&P 500's 1.90% and the Nasdaq 100's -0.95%. ¹ Can this rally sustain itself? We have compiled five key points for investors to consider as to why this breakout may be fundamentally different from previous rallies....

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