Chinese stocks surged in the final days of September, spurred by a new stimulus package that included support for the struggling property sector and plans by the People’s Bank of China to cut interest rates. On Monday, the CSI 300 Index continued to rise, with an increase of more than 8%, its largest single-day gain since 2008. Because of this excitement, China ETFs dominated the list of top-performing funds in September, according to FactSet. The iShares MSCI China ETF (MCHI) is up about 22% this month, while the KraneShares CSI China Internet ETF (KWEB) is up more than 32%. KWEB 1M mountain KWEB was one of the best-performing non-leveraged ETFs in September. Other top-performing stocks include the Global However, there have been bouts of excitement in the Chinese market before, and it hasn’t always been kind to investors. Chinese stocks have long lagged U.S. markets and some overall measures of global equities. The drawdown is particularly severe. Since 1992, the MSCI China Index has fallen an average of nearly 30% a year, more than twice the rate of the S&P 500, according to Strategas. Since investors tend to buy heavily when Chinese stocks are hot, the performance of China ETFs looks worse from a client cash base. “Chinese ETFs are one of the few categories with net inflows exceeding current AUM, along with long-term bonds (TLT) and long-term volatility (VXX),” Strategas ETF strategist Todd Sohn said in a May note. “China’s allocation depends on timing. Big gains are often followed by big losses. The average gain over 176 trading days is +78%, while the average decline over 165 trading days is -42%,” the report continued. To be sure, this rally does have some big-name devotees. Hedge fund billionaire David Tepper said Thursday on CNBC’s “Squawk Box” that he sees a “whole shift” in China and that he is buying stocks tied to the country.
