You may have encountered some commentary about the Chinese economy in recent weeks, specifically about how Chinese stocks are booming in response. Indeed, that has turned out to be the case.
Over the past month, the CSI 300 Index, which covers 300 of the largest Chinese stocks listed on both the Shanghai and Shenzhen Stock Exchanges, has rocketed by a whopping 25.84%. 25.06% of those gains have come since 23 September, just over a fortnight ago.
That happens to be when the Chinese government announced a major new stimulus package for the country's economy. As we covered at the time, this could see up to US$140 billion in liquidity deployed by the People's Bank of China to stimulate economic growth.
This has already turbocharged Chinese stocks, which, until last month, had been languishing for years.
However, one ASX expert is predicting that we could see even more government stimulus in China. As a result, he is buying up Chinese stocks on the assumption that they are too cheap to ignore.
As reported by the Australian Financial Review (AFR) this week, Regal Partners' chief investment officer, Phil King, reportedly told investors that having at least some exposure to the Chinese markets was important right now simply because "valuations are so compelling". Here's some more of what he told investors:
I hate to say this, but sometimes you've just got to close your eyes and buy things because they're just too cheap…The bear market in China is nearing its completion, and we think we'll see Chinese equities turn around a long time before they solve all the problems in the economy.
How to buy Chinese stocks on the ASX?
So, if ASX investors wished to follow King's advice and buy Chinese stocks, how can they do so?
Well, it's a little bit tricker than you might assume. Unlike other stock markets like Britain, Japan and the United States, ASX brokers don't usually offer access to Chinese stocks directly. That's because Chinese laws generally prohibit foreigners from owning stocks themselves.
But that doesn't mean Australian investors can't buy Chinese stocks at all. The easiest way to do so is by owning them indirectly. There are a few managed funds and exchange-traded funds (ETFs) in Australia that offer Chinese exposure.
One such ETF is the VanEck FTSE China A50 ETF (ASX: CETF). Last week, we covered how this ASX ETF has rallied convincingly in recent weeks. CETF's portfolio gives indirect access to 50 of the largest Chinese stocks on the market, so that's a useful proxy if you wish to add a slice of China to your ASX portfolio.
Another option is the VanEck China New Economy ETF (ASX: CNEW). This fund covers more than 100 Chinese stocks, with a special focus on those in 'future-facing' sectors like tech, consumer goods, and healthcare.
A final ASX ETF to consider for Chinese exposure is the iShares China Large-Cap ETF (ASX: IZZ). This China-focused fund is similar in nature to CETF, offering ASX investors an underlying portfolio of 50 of the largest stocks in China.
Considering the difficulties of investing directly in Chinese stocks, these ASX ETFs are probably the easiest way to add these exotic shares to an ASX portfolio today.
