Exchange-traded funds (ETF) offering exposure to Chinese equities have risen to become one of the top performers over the past year, rebounding strongly after a prolonged downturn.
This is according to Global X’s latest ETF market scoop, which showed that the iShares China Large-Cap ETF saw the strongest one-year return in the Australian market of 58.6 per cent.
The launch of DeepSeek earlier this year underscored China’s expanding influence in the AI revolution, while investor sentiment strengthens as expectations of economic stabilisation and policy support fuel renewed foreign investment in the world’s second-largest economy.
Speaking to InvestorDaily, Global X senior investment strategist Marc Jocum explained that Chinese equities have been buoyed by increased stimulus measures, a rebound in consumer sentiment, and a reduction in fears surrounding regulatory crackdowns.
“This macro recovery has been supported by strong performance from key companies,” Jocum noted. “Xiaomi surged after launching its electric vehicles (EV) to massive demand, BYD extended its position as a global EV powerhouse, taking market share away from Tesla, and Alibaba bounced back amid signs of stabilising e-commerce and improved profitability.”
With investor confidence supported by a broader tech resurgence, Jocum said, together, these developments positioned China as a compelling opportunity within emerging markets.
This comes as the Australian ETF market grew 27.3 per cent over the past year to March to $250.7 billion, spanning 409 products.
According to Global X, this was driven by some $37 billion in net inflows, positive market movements, and numerous unlisted active funds converting into active ETFs.
Despite the Australian ETF market having fallen over the last couple of months on the back of market volatility, the ETF provider said that there have now been 106 consecutive months of net inflows into ETFs.
In fact, the local market has experienced its strongest start to the year in terms of net flows, with more than $11 billion pouring in year-to-date.
Another winner to come out of the market reshuffle has been the gaming and e-sports sector, led by AppLovin’s 300 per cent share price surge on the back of strong earnings, advancements in its AI advertising engine, coupled with its addition to the Nasdaq 100 Index.
Namely, the Betashares Video Games and Esports ETF came in second for one-year returns, reporting gains of 58 per cent.
“Gaming and e-sports ETFs have experienced significant growth, propelled by key companies like AppLovin, DouYu, XD and DeNA,” Jocum explained.
“Similarly, Tencent reported strong revenue growth in its gaming division, contributing to a solid earnings result.”
Additionally, gold and gold miner ETFs rounded out the top five performers for the year – with the VanEck Gold Miners ETF, Betashares Global Gold Miners Currency Hedged ETF, and the iShares Physical Gold ETF reporting gains of 54.2 per cent, 53.7 per cent and 47 per cent, respectively.
According to Jocum, gold miners have enjoyed their direct leverage to rising gold pricing, with the yellow metal recently seeing record highs above US$3,000 per ounce.
“This surge has not only enhanced miners’ profit and cash flow margins but also attracted investor interest, leading to increased inflows into global gold mining ETFs,” the strategist added.
“Surprises in economic conditions, whether positive or negative, can trigger market moves. It underscores the importance of remaining diversified across sectors and regions to navigate such volatility, as predicting markets is incredibly challenging.”
It was this time only three months ago that the strongest one-year performers included Global X’s bitcoin ETF, its Ethereum ETF, and Munro’s Climate Change Leaders Active ETF.
Now, after a strong performance in 2024, cryptocurrency ETFs pulled back due to risk-off sentiment.
The Global X 21Shares Ethereum ETF saw one-year losses of 46.6 per cent, leading the pack for worst performers in the 12 months to March.
While bitcoin has remained positive over the past year – tracking 10.11 per cent higher over the last 12 months despite some eye-watering losses in recent weeks – Ethereum on the other hand has fallen approximately 47 per cent.
Meanwhile, energy transition and clean energy ETFs remained among the poorest performers, Global X noted, driven by high interest rates, fading government support, and supply chain challenges.
“Uranium spot prices hit their lowest since November 2023, driven by supply uncertainties from Russian uranium sanctions and reduced contracting volumes,” the ETF provider noted.
As such, the Betashares Global Uranium ETF, Global X Hydrogen ETF, VanEck Global Clean Energy ETF and T8 Energy Vision Active ETF rounded out the top five worst performers over the last year.
