Investors seem to think China stocks — not America's — are great again. And the separation is even taking place with tech stocks and the S&P 500.
Invesco China Technology ETF returned 22% this year so far, absolutely trouncing the U.S. focused S&P 500's 4.2% return, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and Morningstar Direct. The China tech ETF is even topping the Invesco QQQ Trust ETF, which focuses on U.S. tech stocks. The QQQ return this year is just 5.1%.
"Clearly the U.S. and China trade tensions abound, but investors … are looking past this and trying to make bets on Alibaba and the China tech market, a smart move in our view," said Wedbush's Dan Ives.
What's Driving China Tech Stocks Vs. S&P 500?
On a macro level, China stocks are getting a lift from recent tariffs from the U.S. Investors think this squeeze on global trade will help the Chinese government's interest in working with the public sector.
Additionally, investors regained interest in China's companies' ability to drive down prices on technology. Already companies in China are finding success in AI and biotechnology.
On a more granular level, China ETFs are getting a lift from strong showings by individual stocks. The largest holding in Invesco China Technology is Tencent, a mobile app company. The stock is a 10.4% position in the ETF. And shares are up sharply this year, giving them an RS Rating of 92.
Analysts think Tencent's profit will rise 11% in 2025 following a 36% jump in 2024.
China's PDD is another big winner this year. The e-commerce stock's RS Rating is just 42. But the stock is up 35% this year. Analysts are calling for 72% earnings growth in 2024 and 13% in 2025.
Not Just Tech
Don't think it's just China tech stocks that are outperforming. IShares MSCI China ETF is up nearly 17% this year, too. And iShares China Large-Cap is up 17.4%. Both are outperforming the S&P 500.
Looks like China is the nation investors are betting on.
"Outside of a growing list of stimulus measures implemented by Beijing since last fall, policymakers also appear to be taking a more friendly stance toward the private sector," said Adam Turnquist, chief technical strategist for LPL Financial. "The recent public display of support by (President Xi Jinping) marks a potential policy shift toward a more business-friendly environment for non-state-owned companies."
China Stocks Are Great Again
Top China ETFs this year beat U.S. stocks
| Name | Ticker | YTD Market Return |
|---|---|---|
| Invesco China Technology | CQQQ | 21.97% |
| KraneShares CSI China Internet | KWEB | 21.72 |
| iShares China Large-Cap | FXI | 17.38 |
| iShares MSCI China | MCHI | 16.79 |
| Invesco Golden Dragon China | PGJ | 16.21 |
| S&P 500 * | 4.20 | |
| Invesco QQQ Trust * | QQQ | 5.09 |
