Glimpse of hope in China draws investors

‘China Digitalization’ remained the top choice for global investors last week, bringing in USD$536 million thanks to new game licenses and hopes of an easing tech crackdown. Meanwhile, ‘Natural Resources’ came in second in terms of flows, having pulled in USD$344 million of investor capital.

Good news from China pulls in more capital 

Chinese officials announced the approval of over 60 new game licenses, including game titles belonging to developers such as Perfect World and Mihoyo. However, no foreign developers were on the list extending the 12-month dry spell for imported games. The news came on the heels of a report that Beijing is ending its probe on ride-hailing firm Didi Global, which the market interpreted as the government backing off from its crackdown on tech giants, noting that it had previously moved to curb the power of the largest corporations. On another front, the Chinese state media announced easing big-city lockdowns with public transport and restaurants back online. The positive news steered global investors into the ‘China Digitalization’ theme pushing it to become the leader of flow receivers in the thematic universe, similar to the prior week. The theme pulled in USD$536 million of new capital compared to the previous week’s USD$399 million net inflows. The cash influx mainly driven by investors buying into the KraneShares CSI China Internet ETF (ARCX:KWEB). The ETF was the top flow receiver having witnessed big inflows netting USD$461 million week-to-date.

‘China Digitalization’, ‘Emerging Markets Infrastructure’, ‘China Disruptive Technology’, and ‘China Consumer Growth’  are the only themes following the ‘Emerging Markets Awakening’ trend that experienced net inflows. As such, ‘Emerging Markets Awakening’ was crowned the top flow receiver amongst the 13 different trends. It brought in USD$516 million of net inflows over last week most of which came from investments in the ‘China Digitalization’ theme.

ETFs in play:

• China Consumer Growth ETFs
• China Digitalization ETFs
• China Disruptive Technology ETFs
• China Fundamental Economy ETFs
• China Life Sciences ETFs
• China New Economy
• Emerging Markets Awakening
• Emerging Markets Consumer Growth
• Emerging Markets Digitalization
• Emerging Markets Disruptive Technology
• Emerging Markets Future Mobility
• Emerging Markets Infrastructure
• Sustainable Development Projects

Investors get back into natural resources 

The second most popular investment strategy in the thematic universe was ‘Natural Resources’ having pulled in USD$344 million of net inflows spread across 7 out of the 12 ETFs following the theme, predominantly domiciled in the United States. The USD$3.8 billion SPDR S&P Global Natural Resources ETF (GNR), the USD$763 million SPDR S&P North American Natural Resources ETF (NANR), and the USD$8.7 billion FlexShares Morningstar Global Upstream Natural Resources Index Fund ETF (GUNR) attracted USD$180 million, USD$96 million, and USD$42 million of net inflows. The three flow leaders have outperformed the broader market by a wider margin having earned 12.64%, 33.80%, and 16.31% in returns respectively. ’Agribusiness’ and ‘Water’ are two other themes capturing the investment opportunity in the ‘Natural Resources’ trend and managing to end up with net buyers for the week. They attracted USD$33 million and USD$13 million. The remaining themes, aligned to the ‘Natural Resources’ investment opportunity, failed to attract investors, with net outflows totaling USD$9 million last week.

ETFs in play:

• Agribusiness ETFs
• Natural Resources ETFs
• Strategic Metals ETFs
• Timber and Forestry ETFs
• Water ETFs

Data for this article is as of June 10th, 2022.