According to recent data, Wall Street's enthusiasm for Chinese assets is rapidly growing. From September 23 to September 27, multiple overseas-listed Chinese ETFs, such as KraneShares China Internet ETF (KWEB, Financial), iShares China Large-Cap ETF (FXI), and MSCI China ETF (MCHI), saw significant increases in asset size and net inflows, hitting new highs for various periods. This robust inflow indicates strong foreign investor confidence in Chinese assets.
KraneShares China Internet ETF (KWEB, Financial) saw a net inflow of $199 million within the week, marking the highest level since March 2023. The ETF rose more than 26% in this period. As of September 27, KWEB's asset size surged to approximately $5.89 billion, making it the largest China-focused ETF listed in the US.
Hedge fund mogul David Tepper (Trades, Portfolio)'s firm, Appaloosa Management, significantly increased its holdings in KWEB and FXI during Q2 2023. Specifically, Tepper added 565,000 shares of FXI, bringing its end-of-period market value to $180 million, and 1.015 million shares of KWEB, worth $121 million by the end of Q2. Tepper recently stated that the latest Chinese policies were unexpectedly favorable, prompting him to increase his allocation to Chinese assets, including ETFs and futures.
As of September 25, KWEB's asset size was $4.65 billion. By September 27, it had soared to $5.89 billion, an increase of over $1.2 billion in just two trading days, reflecting a more than 26% rise. Compared to its asset size of $4.18 billion at the end of August, the increase exceeded 40%, indicating a rapid rise in foreign interest in Chinese assets.
MSCI China ETF-iShares (MCHI) also experienced a significant rise of over 19% in the past week. As of September 27, MCHI's asset size reached $5.21 billion, up more than 20% from the end of August. The ETF saw a net inflow of $254 million during the week, reversing several weeks of net outflows and setting a nearly three-year record for weekly net inflows.
Similarly, FXI saw a net inflow of $497 million within the same week, the highest in nearly three years. By September 27, FXI's asset size reached $4.71 billion, a growth of nearly 19% from the end of August. Additionally, the leveraged FTSE China 3X Long ETF (YINN) surged nearly 60% within the week, with its asset size increasing by approximately 56% compared to the end of August.
Other renowned investors also share Tepper’s positive outlook on Chinese assets. Nick Wilcox from the hedge fund firm Man Group expressed optimism about the continued rebound in Chinese stocks, driven by supportive policies, improved earnings, and the US Federal Reserve's easing policies.
Michael Burry (Trades, Portfolio), famous from "The Big Short," has also increased his fund's exposure to Chinese stocks. His fund, Scion, boosted its holdings in Alibaba, making it the top holding with a market value of $11.16 million by the end of Q2. Scion also increased its position in Baidu, making it the fourth-largest holding.
Other top Chinese stocks, such as Pinduoduo, Alibaba, NetEase, JD.com, Huazhu, Beike, iQiyi, Full Truck Alliance, Trip.com, New Oriental, and Tencent Music, saw varying degrees of institutional buying in Q2.
For instance, JPMorgan significantly increased its holdings in Pinduoduo, Alibaba, and iQiyi during Q2. High Ridge Capital also boosted its positions in Pinduoduo, NetEase, Huazhu, and Beike, making Pinduoduo the top holding in its portfolio. Baillie Gifford (Trades, Portfolio) increased its stake in Pinduoduo while reducing holdings in Nvidia and other US tech stocks. Soros Fund bought significant shares of Alibaba and JD.com.
As several major policies come into play, foreign investors are increasingly bullish on Chinese assets. Morgan Stanley’s stock strategist Laura Wang expects a positive response from both onshore and offshore Chinese markets, potentially leading to tactical rebounds. AllianceBernstein’s Global Chief Investment Officer Chris Hogbin remains highly optimistic about the long-term prospects of the Chinese market. BlackRock Chief Equity Investment Officer Yu Fei Shen noted that the Fed's rate cuts provide more room for global monetary easing, benefitting high-dividend assets in Hong Kong.
