Chinese stocks have taken investors on a ride this year. Shanghai and Shenzhen have been the best performing global markets this year, with the Shanghai composite index rallying nearly 24% and the Shenzhen Component Index Fund ETF up over 34%.
But the Chinese market tanked this week, with the Shanghai index — which was up more than 30% as of last Friday — falling nearly 6%. That makes this the worst week for Chinese stocks since October.
Capital Economics, an independent research firm, attributed the weakness to comments made by China’s top decision-making body about the country’s economic stimulus plans. While Chinese officials said they would continue to support the economy, better-than-expected first-quarter GDP results sparked worries about potential near-term policy easing.
Even so, a number of exchange-traded funds pegged to the Chinese market are rallying — and even beating the S&P 500. The iShares MSCI China ETF, the WisdomTree ICBCCS S&P China 500 Fund, and the WisdomTree China ex-State-Owned Enterprises Fund have all outpaced the S&P this year, up about 21%, 26% and 31% respectively.
And, according to WisdomTree Asset Management’s Executive Vice President and Global Head of Research Jeremy Schwartz, their advantages have a lot to do with the types of stocks they hold.
With U.S.-based and Hong Kong-listed companies in the mix, Schwartz said WCHN offers “the broadest beta solution in the marketplace today.” But outperforming even that is WisdomTree’s China ex-State Owned Enterprises Fund, which excludes government-owned Chinese entities.