Tencent Holdings (TCEHY) gave China ETFs a boost Wednesday after the Chinese internet leader delivered a quarterly earnings and sales beat.
The mobile messaging and online game provider reported revenue of $11.7 billion, up 48% in local currency from the prior year, and above views for $11.3 billion. Net profit of $3.7 billion also topped estimates for $2.75 billion. Tencent saw an 11% increase in its WeChat messenger app and strong smartphone game revenue.
Shares gapped up in the stock market today to reclaim their 50-day moving average for the first time in nearly two months. The top Chinese internet stock is widely held by China-focused ETFs. It closed Wednesday with a 7% gain.
Alibaba, another top holding of many China funds, on May 4 reported quarterly earnings that beat views on both the top and bottom lines. The e-commerce giant also guided its full-year revenue growth above consensus forecasts. It rose 1% Wednesday.
China’s stock market is expected to attract more money next month, when index-tracking service MSCI starts to include China A-shares in its emerging-market index. The A-shares are mainland companies listed on the Shanghai and Shenzhen exchanges. China tried several times to gain inclusion in MSCI’s indexes, which would open up its A-shares to global index funds. It finally got approval last June.
“We are constructive on Chinese equities despite tensions over trade,” according to iShares’ website. “We see protectionist threats as largely negotiating tactics, while Chinese reforms a stable growth environment and a solid earnings outlook support equities.”
Wider A-Shares Access
“The inclusion of A-shares provides investors with a more accurate picture of — and access to — the Chinese market,” according to iShares. “A-shares provide access to sectors of the economy currently underrepresented in other share classes, with larger weights in sectors such as materials, industrials, consumer discretionary and health care.”
Here are some of the biggest China ETFs, in order of assets:
IShares China Large-Cap (FXI) advanced 1.7% to recover its Tuesday loss. The $4.6 billion fund, which tracks the FTSE China 50 Index, provides access to big-cap Chinese stocks that trade on the Hong Kong Stock Exchange. Top holdings included China Construction Bank, Tencent Holdings (TCHEY) and China Mobile (CHL). Its top five names accounted for about 37% of the 50-stock portfolio.
IShares MSCI China (MCHI), which tracks the MSCI China Index, rallied 2.1%. It gapped down and fell nearly 2% Tuesday to test its 50-day line. The $3.7 billion fund’s biggest holdings include Tencent, Alibaba (BABA), China Construction Bank and Baidu (BIDU). The top five names made up roughly 44% of MCHI’s 156-stock portfolio.
KraneShares CSI China Internet (KWEB) rose 1.7%. It gapped down and fell nearly 3% to give up its 50-day line in the prior session. The fund has $1.6 billion in assets and tracks the CSI Overseas China Internet Index. The ETF focuses on Chinese companies whose primary businesses are in the internet or internet-related sectors. Its top five holdings as of May 15 — Alibaba, Tencent, Baidu, Autohome (ATHM) and JD.com (JD) — represented about 37% of the 35-stock portfolio.
SPDR S&P China (GXC) popped 2% Wednesday after losing 1.7% the previous day. It has $1.2 billion in assets and tracks the S&P China BMI Index. The top five holdings — which included Tencent, Alibaba and Baidu as of May 15 — accounted for nearly 39% of assets.
Deustche X-Trackers Harvest CSI 300 A-Shares Fund (ASHR) climbed 0.9% to close nearly at its 50-day line, after giving up 1.4% Tuesday. The fund has $605.4 million in assets and tracks the CSI 300 Index. The fund offers a way for U.S. investors to tap the 300 biggest and most-liquid China A-shares.
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