July trading started off with some meaningful jumps.
Three areas of the exchange-traded fund market — growth, thematic technology and China — have hit new highs to kick off the month, which marked the start of the second half of 2020.
And in the realm of Chinese equities, the iShares MSCI China ETF (MCHI), the KraneShares CSI China Internet ETF (KWEB), the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR) and the KraneShares Bosera MSCI China A Share ETF (KBA) revisited two-year highs.
The success of growth-based investments can be ascribed to some of the market's usual suspects, Tom Lydon, CEO of ETF Trends and ETF Database, told CNBC's "ETF Edge" on Monday.
"We've been talking about FAANG stocks or FMAANG stocks, if you put Microsoft in there, for the last 10 years," he said, referring to the widely used acronyms for the stocks of tech giants Facebook, Amazon, Apple, Netflix and Google parent Alphabet.
Microsoft, Apple, Amazon, Facebook and Alphabet are the top five holdings for VUG, IWF and IVW.
Because the five represent more than 20% of the S&P 500's market cap, they've managed to keep the market afloat as buyers bet on Big Tech during the 11-year bull market, Lydon said.
"But they've also worked out to be the entertainment, the communication, the work-from-home stocks, too, that have really embraced this new environment that we're in," he said. "So, it's been more of the same and I think investors are benefiting from that."
The intersection of tech and Chinese equities has also borne fruit in the early days of July.
The Direxion Daily CSI China Internet Bull 2X Shares (CWEB), a leveraged ETF product for tactical traders, is the top-performing tech ETF year to date, with a 72% gain.
David Mazza, Direxion's head of product, highlighted the fund's underlying exposure to Chinese internet stocks Tencent and Alibaba as a source of strength.
Retail investors flooded the Chinese stock market on Monday, driving the Shenzhen Composite to highs not seen since 2015 and the Shanghai Composite back to 2018 peaks. Some market analysts cited an editorial in state-owned financial outlet China Securities Journal about the importance of building a "healthy bull market" as a partial reason for the rush.
"Turnover has increased," Mazza said. "Now, the authorities are sort of encouraging Chinese retail to get involved with the stock market again, which has sort of been a sleepy exposure for a little while. So, now, seeing China come back is getting very interesting from an equity market perspective."
Chinese markets continued their climb Tuesday. The Shenzhen Composite and Shanghai Composite are up 25% and nearly 10% year to date, respectively.