Hang Seng Soars 33% in 21 Days: Nippon India Hang Seng ETF Hits 5% Premium – Will China’s Stimulus Fuel SIP Gains?

The Nippon India Hang Seng ETF is grabbing attention after China launched a major economic stimulus package to boost its economy. This move increased the liquidity in China’s stock market, leading to optimism across Asian markets. As a result, investors are rushing to buy funds and stocks to take advantage of the rally. On October 4, the Nippon India Hang Seng ETF hit its daily price limit and had no buyers at the upper limit. The ETF has surged 20.7% in the last week, benefiting from the Asian market rally, and currently trades at a 5% premium.

Hang Seng index

The Hang Seng index began its rally on September 11, 2024, at 17,108.71 points and jumped to 22,736.87 points by October 4, 2024. This is a massive 32.9% increase in just 21 days. Before this rally, the Hang Seng index had recorded annualized returns of -11.4% over one year and -6.9% over three and five years, but the recent gains have significantly improved its performance.

Nippon India Hang Seng ETF performance

The Nippon India Hang Seng ETF, which tracks the Chinese index, saw a 37.9% return during the rally. Experts say the ETF has delivered a 54% return in the last year and 22% in the past two years. According to stock market data, the ETF reached its 52-week high of ₹390.75 on October 3, 2024.

For investors who started a monthly SIP (Systematic Investment Plan) of ₹20,000 in the ETF three years ago, they would have gained ₹10,198 by August 31, 2024, resulting in an annualized return of 0.92%. However, after the recent rally, the same SIP now shows a gain of ₹3,36,987 with a 26.45% annualized return as of October 4, 2024.

Will China’s market rally impact SIP returns?

Experts believe that China’s stimulus policy has positively impacted the returns of the Nippon India Hang Seng ETF. However, they warn that global funds, like the Hang Seng ETF, are influenced by external factors and are more volatile than domestic funds. Indian funds, such as HDFC Flexi Cap Fund and Kotak Emerging Equity Fund, offer more stable returns with 33.91% and 35.62% returns over three years, respectively. With India’s steady economic growth, long-term prospects for domestic funds are still more appealing compared to global funds exposed to China’s markets.

Although the Chinese market is still trading at a 45% discount from its 2018 peak, many experts see it as a good opportunity for investors looking for cheap entry points. Since the Nippon India Hang Seng ETF is currently closed for new investments, those interested in Chinese markets may consider alternative options, such as actively managed funds like Axis Greater China Equity Fund of Fund and Edelweiss Greater China Equity Offshore Fund.

China’s market rally fueled by stimulus measures

The recent surge in Chinese stocks was driven by the Chinese government’s efforts to support the struggling economy. China has mainly focused its stimulus on the property sector, causing a 20% rise in stock prices in the city and mainland China. The CSI 300 index has rallied over 25% in a nine-day streak, with the benchmark Hang Seng index climbing nearly 10% in a week. Global hedge funds have also shown strong interest in Chinese equities following Beijing’s bigger-than-expected stimulus announcements.

Beijing’s stimulus package

China’s central bank unveiled its largest stimulus since the pandemic on September 24, 2024, aiming to achieve the country’s economic growth target. It reduced the reserve requirement ratio (RRR) for banks by 50 basis points, releasing 1 trillion yuan (approximately $142 billion) for new lending. China also plans to inject funds into six major state-owned banks. Additionally, the central bank cut the seven-day reverse repo rate to 1.5%.

Despite these measures, China’s market remains 45% below its January 2018 peak, making it a potential investment opportunity. However, experts advise caution as global market factors continue to affect ETFs exposed to China.