Unable to buy A-shares, is tracking the Hong Kong stock ETF that follows the A-share index the best alternative?

During the National Day holiday, the strong bull market in A shares was forced to pause due to the market closure, making the Hong Kong stock market the playground for funds.

In this epic surge, there is a significant difference from the past - a large amount of funds pouring into the ETF market. With a series of bullish stimuli and inability to buy A-shares due to the National Day holiday, Hong Kong ETFs tracking the A-share index have become the focus of fund chasing.

With the A-share market opening tomorrow, market sentiment is accelerating. ETFs closely related to A-shares have surged again today, as seen from the recent 5-day price fluctuations, ETFs tracking the A-share index have led the gains. $Bosera STAR 50 Index ETF (02832.HK)$Please use your Futubull account to access the feature.$Bosera SZSE Chinext Daily (2x) Leveraged Product (07234.HK)$Please use your Futubull account to access the feature.$CSOP STAR 50 Index ETF (03109.HK)$Please use your Futubull account to access the feature.$Premia China STAR50 ETF (03151.HK)$Please use your Futubull account to access the feature.$CSOP SZSE CHINEXT ETF (03147.HK)$ In the past 5 trading days, they have respectively risen by over 164%, 159%, 80%, 69%, 52%.

In addition to the above mentioned rapid ETFs, Futu News has compiled ETFs tracking the A50, CSI 300, Science and Technology Innovation Board 50, and Chinext Price Index in the Hong Kong stock market for mooers to choose from:

(*For Hong Kong-listed ETFs with an average daily turnover of more than 3 million Hong Kong dollars and tracking A Share Index)

However, some industry insiders believe that in the situation where A-shares have not opened, the gains of individual Hong Kong ETFs tracking A-shares have already been excessively high. Investors need to pay attention to risks such as premiums and cooling sentiment.

In addition, listed on the stock market in Japan, $One ETF Southern China A-Share CSI 500 (2553.JP)$ today also soared by over 89% again, with this ETF surging over 1000% in the past 4 days.

Interestingly, amidst the sharp rise in the Chinese stock market, a "Chinese Dragon ETF" which tracks the performance of large Chinese companies, $Roundhill China Dragons ETF (DRAG.US)$ has landed on the US stock market.

Currently, the components of this ETF include Tencent, Pinduoduo, Alibaba, Meituan, BYD Company Limited, Xiaomi, JD.com, Baidu, and Netease. The issuer stated: "DRAG is the first ETF ever to offer precise investment in China's leading technology giants."

Among the nearly 20 ETFs launched by Roundhill Investments, the best performer is $Roundhill Magnificent Seven ETF (MAGS.US)$ , which tracks the seven giants' stocks in the US market. Launched in April 2023, it has risen over 90% cumulatively. This ETF is considered as the US version of DRAG.

Institutions are collectively optimistic! Expecting the market to reach a significant turning point.

During the A-share market closure, looking at the global market dynamics, Chinese assets are continuously being heavily bought.

According to recent short-term views from Morgan Stanley, there has been a change in market sentiment towards China in the past week, with some marginal adjustments in positions, but there is still room for further adjustments. Retail investors have mainly been obtaining broad beta exposure through ETFs rather than individual stocks. CTAs have bought an estimated over $15 billion of Chinese stocks in the past two weeks. At the same time, Morgan Stanley indicated that there is a historic high demand for call options.

Citigroup released a research report, reiterating a positive outlook on the Chinese market. They raised their Hang Seng Index target by 24% to 26,000 points by the end of June 2025, and set the year-end target for 2025 at 28,000 points. Citigroup also raised the target for the CSI 300 and MSCI China indices in the first half of next year to 4,600 points and 84 points, respectively, while setting the year-end targets at 4,900 points and 90 points.

A research report from CITIC Securities pointed out that significant changes in policy signals indicate a major reversal in market expectations. Continuous reinforcement of domestic demand policies may lead to an early arrival of price signals and the market will witness a significant turning point. Following the expectation of a major reversal, incremental funds mainly from individual investors will enter the market, characterized by a pulsating short-term rise. Currently in the transitional phase towards the market's major turning point along with low P/B and domestic demand repair as the core, once price signals confirm, the market will usher in a major turning point in the form of an annual credit cycle-driven bull market, offering institutional investors a better entry opportunity.

Zheshang Securities' macro team also pointed out that during the holiday period, Hong Kong stocks rose sharply, mainly due to expectations of domestic policy reversal improvement. In the future, there is still room for further fiscal policy stimulus, which will continue to significantly improve market risk appetite; both resident savings and foreign funds are expected to become incremental funds for both markets. After the holiday, A-shares and Hong Kong stocks are expected to resonate and continue to strengthen.

Nomura Securities pointed out that this policy incentive has been quite successful, and believes that the government will definitely introduce a series of fiscal measures and other supportive policies in the future. However, Nomura also cautioned that individual investors, especially those who are too young and have not experienced the previous ups and downs, are eager to open accounts, fearing to miss what seems to be a rare rebound in a lifetime. After enjoying the initial enthusiasm, investors may need to pay attention to the most unfavorable scenarios.

Editor/Somer