China Sector Report: Q4 2019

The Global X Q4 China Sector Report can be viewed here. The report provides macro-level and sector-specific insights across the eleven major economic sectors in China’s equity markets.

Summary

In the last quarter of 2019, all 11 GICS (Global Industry Classification Standard) sectors in China rebounded to generate positive returns on the prospect of a near-term trade deal (“Phase One” agreement) with the US.1 Consumer Discretionary, Information Technology, Materials, and Real Estate all outperformed the benchmark MSCI China Index.

Source: Bloomberg as of Dec 31, 2019

Performance shown is past performance, based on the NAVs of the underlying sector ETFs and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost and current performance may be lower or higher than the performance quoted. To view standard performance each of the funds, please click on the links available under “Related ETFs” below this post.

The Real Estate sector posted the sharpest rebound, returning over 26% for the quarter, and outperformed the benchmark as well as all the other sectors in December and over the quarter. The sector benefited from government measures promoting urbanization as well as from the ramp up of infrastructure investments and the scaling back of residency restrictions.2

The Information Technology sector continued its strong performance through the second consecutive quarter in Q4. Trade tensions with the US made Chinese tech giants more reliant on domestic components, stimulating demand for semiconductor firms following the rollout of 5G technology.3 Greater foreign investment and elevated government spending also boosted the sector, helping to explain the strong sector performance.4

As the largest sector in the MSCI China Index, Consumer Discretionary contributed most to the benchmark’s performance, followed by Communication Services and Financials, which benefited from government efforts to transform an investment- and manufacturing-driven economy to a consumption- and services-fueled new economy. Consumer Discretionary narrowly outperformed the benchmark in quarterly performance but lagged in monthly performance.5

Defensive sectors Energy and Utilities were the worst performers during the quarter, underperforming the MSCI China Index and other cyclical sectors. This was predominantly due to the government’s implementation of tighter import rules across several ports to steady total year-on-year coal imports and lower global oil prices.6 Real Estate and Information Technology were the most volatile sectors over the reporting period.

Related ETFs