(Bloomberg) -- The largest U.S. exchange-traded fund that tracks mainland Chinese stocks posted a record eighth week of inflows amid speculation that easing of monetary policies will help extend equity gains in Asias biggest economy.
Investors added $34.6 million to the Deutsche X-trackers Harvest CSI 300 China A-Shares ETF last week to complete the longest stretch of asset gains since its November 2013 debut, according to data compiled by Bloomberg. More than $300 million has been put into the fund since the beginning of last month as it soared 35%.
Foreigners are using the ETF to chase the biggest rally in five years in Chinas A-share market as measures to stimulate the economy and a trading link with Hong Kong have buoyed stocks. The Shanghai Composite Index, which has soared 49% in 2014, climbed to a five-year high yesterday after the official Xinhua News Agency reported that authorities will adjust the calculation of banks deposits, making more funds available for lending. The benchmark gauge fell 0.4% at the 11:30 a.m. local-time break today.
Given that the change in deposits calculation announced is equivalent to a cut in banks required reserve ratio, then I would expect this to provide further upside stimulus for the A shares, Tony Hann, the head of emerging markets at Blackfriars Asset Management Ltd. in London, said in emailed comments. Since most overseas investors cant invest directly in mainland China stocks, if they want to get in on the rally then the ETF is the way to go, he said.
The A-share ETF slipped 0.6% to $35.95 yesterday in New York after surging to a record last week. A Bloomberg index of the most-traded Chinese stocks in the U.S. retreated 0.7% following a two-week advance.
The Peoples Bank of China will widen the definition of a deposit in 2015, boosting the lending capacity of Chinese banks that have to cap loans at 75% of funds held. Broadening the definition of a deposit could make an additional 5 trillion yuan ($800 billion) to 5.5 trillion yuan available, according to analysts at Credit Agricole CIB and Guotai Junan Securities Co. The central bank last month cut benchmark interest rates for the first time since 2012 to stem a slowdown in the economy.
The iShares China Large-Cap ETF, which tracks Hong Kong- listed companies, retreated 0.2% to $41.59 following a 3.4% surge on Friday. The iShares ETF posted inflows of $42.6 million last week, after attracting $65.9 million in the prior five-day period.
E-commerce operators led a slump in companies on the Bloomberg US-China gauge in New York. Jumei International Holding Ltd., a web seller of beauty products, tumbled 7.1% to $13.99, the worst performance on the index. JD.com Inc., Chinas second-largest online retailers by orders processed, slid 2% to $24.08. Internet-based fashion retailer Vipshop Holdings Ltd. dropped 3.4% to $19.28.