By Saqib Iqbal Ahmed
NEW YORK (Reuters) – Shares of U.S.-listed Chinese exchange traded funds edged higher on Thursday, tracking gains in the Chinese markets after the central bank cut borrowing costs to aid a shaky economic recovery and as investors pinned hopes on further stimulus.
China’s stock markets rose on Thursday, with the benchmark CSI 300 Index rising 1.6% after the central bank cut the borrowing cost of its medium-term policy loans for the first time in 10 months.
Shares of the two largest U.S.-listed Chinese ETFs – the iShares MSCI China ETF and the iShares Trust-China Large-Cap ETF, which between them have about $13 billion in assets, rose 1.8% and 2.0%, respectively. The ETFs remain 15% and 13% off, respectively, from their January highs.
China is planning major steps to revive its flagging economy, including the possibility of billions of dollars in new infrastructure spending and looser rules to encourage property investors to buy more homes, the Wall Street Journal reported on Thursday.
The Chinese economic rebound seen earlier this year has lost momentum in the second quarter, prompting China’s central bank to cut some key interest rates this week for the first time in nearly a year, with expectations of more to come.
China’s economy stumbled in May with industrial output and retail sales growth missing forecasts, adding to expectations that Beijing will need to do more to shore up a shaky post-pandemic recovery.
Recent interest rate cuts and hopes of more fiscal stimulus was helping lift Chinese stocks on Thursday, Quincy Krosby, chief global strategist for LPL Financial, said.
Options on several U.S.-listed Chinese exchange traded funds have drawn bullish flows in recent days.
Krosby, however, cautioned that investors with a longer time horizon may want to wait to see evidence of stimulus.
“It would be prudent to assess the measures that will be introduced and that any investment there is viable,” Krosby said.
(Reporting by Saqib Iqbal Ahmed, editing by Deepa Babington)