A 'huge pivot' in China is fueling the emerging markets boom, says Jan van Eck

Published Mon, Feb 6 20233:54 PM EST

Jesse Pound @/in/jesse-pound @jesserpound

The hot start to 2023 for emerging market stocks and ETFs is being bolstered by what appears to be a significant change in approach from Chinese government officials, according to VanEck CEO Jan van Eck. The Chinese government has been lifting its Covid restrictions in recent months, helping global growth to accelerate, but the change is not only limited to public health policy, van Eck said. "There's been a huge pivot over the last two or three months. One day we'll know why, but there has been a pivot. We deal with the regulators ... because of our operations there, and their tone has changed a lot. They're emphasizing growth right now," van Eck said at the Exchange ETF conference in Miami. Chinese ETFs have raced ahead, even as global stocks have rallied to start the year. The iShares MSCI China ETF (MCHI) had a total return of more than 10% this year, through Feb. 3. MCHI YTD mountain This popular China ETF is outperforming in 2023. The rally gained steam after China's Banking and Insurance Regulatory Commission granted Ant Group approval to expand its consumer finance business . Soon, American depositary receipts of major Chinese companies soared. Van Eck said that China should be a "tactical allocation" for investors, but warned that government stimulus from China and Japan was another part of the big January rally for global markets and may prove unsustainable. China hasn't alone in the booming international market of early 2023. International equity was the top category for fund flows in January, according to a note from Citigroup U.S. equity strategist Scott Chronert. IShares Core MSCI Emerging Markets ETF (IEMG) and the JPMorgan BetaBuilders Europe ETF (BBEU) were the two leading individual funds, and the UK's FTSE 100 hit a record high last week . International investing dovetails nicely with value and income, two other strategies that are popular among investors right now, and a weaker U.S. dollar, which has been declining in recent months. For example, Pacer ETFs — which operates the $13 billion US Cash Cows ETF (COWZ) — is seeing success with its international funds. Its Global Cash Cows Dividend ETF (GCOW) has attracted more than $200 million in inflows this year, and the smaller Emerging Markets Cash Cows 100 ETF (ECOW) appears to be gaining traction with investors as well. PacerETFs president Sean O'Hara said valuations in the international market currently offer a better deal for investors. "They're ahead of us in terms of being realistically valued. The U.S. stock market is still trading at 18, 19 times earnings. ... They're a little cheaper over there," said The boom for international stocks comes after the U.S. market raced ahead last decade. Van Eck pointed to the outsized growth of major U.S. tech firms as a key reason for that outperformance, but said that era appears to be over. "We've got a decade where you're really taking a risk if you're under invested overseas," van Eck said. VanEck managed approximately $69 billion in assets as of Dec. 31, 2022, the firm says.