Nippon India Hang Seng ETF Takes Center Stage Amid Economic Stimulus
China’s recent implementation of an extensive stimulus package has captured the attention of investors globally. This initiative is designed to invigorate the economy and enhance liquidity within the Chinese stock market and banking system. As a result, investor sentiment in Asian markets has surged, prompting many to seek opportunities in funds and equities during this market rally. One standout in this landscape is the Nippon India Hang Seng ETF, which uniquely tracks the Hang Seng index in India and saw its shares reach the upper circuit limit on October 4, 2024.
The Nippon India Hang Seng ETF has reached its maximum permissible price increase for the day, with no buyers willing to purchase at that elevated price. Following the positive momentum in Asian markets, the ETF reported a remarkable increase of nearly 20.7 percent over the past week. Market experts observed that the ETF is currently trading at a premium of five percent and is not currently open to new investments, highlighting the high demand among investors.
Hang Seng Index Performance During the Rally
The Hang Seng index has experienced a significant upward trajectory since September 11, 2024, starting at 17,108.71 points and climbing to 22,736.87 points by October 4, 2024. This represents an impressive gain of 32.9 percent in a mere three weeks, underscoring the vitality of the current market conditions.
Prior to this rally, as of August 31, 2024, the Hang Seng index had posted disappointing annualized returns of -11.4 percent per annum and -6.9 percent per annum over three and five years, respectively. However, during the same period, the Nippon India Hang Seng ETF has outperformed with a return of 37.9 percent, making it an attractive choice for investors looking to capitalize on the recent market momentum.
The ETF’s performance over the past year stands out with a remarkable 54 percent return, and around 22 percent in the two years preceding. According to data from the National Stock Exchange (NSE), the Nippon India Hang Seng ETF achieved a 52-week high of ₹390.75 on October 3, 2024.
For instance, Karan Rijhsinghani, Director – Head of Products & Advisory at Atom Prive Wealth, shared that an investor who initiated a three-year monthly Systematic Investment Plan (SIP) of ₹20,000 in the Nippon India Hang Seng ETF would have realized a gain of ₹10,198 by August 31, 2024, equating to an annualized return of 0.92 percent. Following the recent rally, this same investor’s SIP gain would have surged to ₹336,987, leading to an astonishing annualized return of 26.45 percent as of October 4, 2024.
Potential Impact on SIP Returns from the Hang Seng Rally
According to Feroze Azeez, Deputy CEO of Anand Rathi Wealth, the significant rally in the Hang Seng index, stimulated by China’s proactive stimulus measures, is poised to boost the returns from the Nippon India Hang Seng ETF. He noted that the ETF had previously generated returns of 13.08 percent over three years and 5.07 percent over five years.
Nonetheless, experts caution investors to maintain a balanced perspective. Although the Hang Seng-led rally may offer temporary advantages, the volatile nature of global funds could pose risks. Azeez highlighted that despite India’s GDP growth remaining robust at six percent and fiscal deficit management, long-term prospects for domestic funds appear more stable and appealing compared to exposure to Chinese markets.
Despite the recent rally, Chinese markets are still trading at around a 45 percent discount from their all-time highs recorded in January 2018. This presents the Hang Seng index as a potentially lucrative investment opportunity for investors willing to navigate the associated risks.
With the Nippon India Hang Seng ETF currently closed for new subscriptions, those seeking exposure to Chinese equities may consider alternatives, according to Rijhsinghani. Actively managed funds such as the Axis Greater China Equity Fund of Fund and Edelweiss Greater China Equity Offshore Fund can provide investors with valuable access to Chinese markets and a diversified investment approach.
Impact of Chinese Economic Stimulus on Stock Markets
The economic stimulus announced by China primarily focuses on the property sector, contributing to a robust rally in both city and mainland Chinese stocks, which have increased more than 20 percent since the announcement. Beijing’s commitment to providing economic support has significantly buoyed markets, with China’s CSI 300 blue-chip index enjoying a remarkable more than 25 percent gain over nine consecutive days.
As part of the stimulus package, China’s central bank has implemented its most substantial measures since the pandemic, including cutting banks’ reserve requirement ratio to increase liquidity. These reforms aim to generate an additional 1 trillion yuan (approximately $142.21 billion) for new lending purposes. While these measures aim to stimulate economic growth, they have also led to notable shifts in foreign capital influx towards the Chinese markets.
