2 ETFs for investors who believe Chinese stocks will win after Biden-Xi ‘summit’
Long-term Chinese equity investors have had a volatile year so far in 2021. The state’s heavy hand on technology, online education and real estate names has put significant pressure on these investors. actions. For example, this is how several of the widely followed Chinese stocks have behaved since the start of the year (YTD).
- Ali Baba (NYSE 🙂 – down 39.7% year-to-date;
- Baidu (NASDAQ 🙂 – 29.8% over the current fiscal year;
- Baozun (NASDAQ 🙂 – down 50.9% year-to-date;
- Didi Global (NYSE 🙂 – down 40.7% since its IPO in June;
- JD.com (NASDAQ 🙂 – up 4.1% year-to-date;
- New oriental education and technology (NYSE 🙂 – down 88.2% year-to-date;
- Nio (NYSE 🙂 – down 20.7% year-to-date;
- Tencent (OTC 🙂 – down 12.1% year-to-date.
On the other hand, the index is up around 6.9% and the index has returned 2.5%. By comparison, the index, which hit a record high in early November, is up 25.1% since the start of the year. Analysts are now wondering if global investors might start showing cautious optimism about Chinese stocks anytime soon.
Meanwhile, on November 15, US President Joseph Biden and his Chinese counterpart Xi Jinping had a virtual meeting, which was seen as a positive step in open communication despite points of tension between the two countries. After the meeting, the White House reading said:
“The two leaders have covered areas where our interests align and areas where our interests, values and perspectives diverge…. [President Biden] was clear on the need to protect American workers and industries from unfair trade and economic practices by the PRC.
The World Bank notes that over the past four decades, China’s average annual GDP growth has been around 10%, and the country is now “an upper-middle-income country.”
In other words, despite the regulatory issues in the country as well as the occasional global disputes, China is an important country for global investors. Therefore, today’s article features two exchange-traded funds (ETFs) that might appeal to readers who think Chinese stocks might be better off in 2022.
1. Global X MSCI China Information Technology ETF
- Current price: $ 29.06
- 52 week range: $ 27.44 – $ 39.20
- Dividend yield: 1.02%
- Expense ratio: 0.65% per year
According to recent measurements, in the first half of 2021, China’s software and information technology (IT) industry recorded record revenues of $ 682.86 billion, an increase of 23.2% year-on-year .
The Brookings Institution suggests that “China’s competitive advantage is its ability to overtake the United States, as 1.5 billion people generate data that can then be reused for other applications, including artificial intelligence ( AI) and new products and services … China has set a national goal to be the world leader in artificial intelligence by 2030.
Our first fund, the MSCI China Information Technology Global X ETF (NYSE 🙂 provides exposure to large and mid-cap Chinese IT companies. The fund was floated on the stock exchange in December 2018.
CHIK, which tracks the MSCI China Information Technology 10/50 Index, currently has 106 stocks. The top ten holdings represent approximately 45% of total net assets over $ 30 million. In other words, it’s a small fund.
The most important sectors of the fund are electronic components (19.56%), semiconductors (17.96%), telecommunications equipment (13.82%), software packages (13.41%) and computer hardware (5.41%).
Leading manufacturer of optical lenses Sunny optical technology (OTC:); Xiaomi (OTC :), which manufactures smartphones and provides Internet services; solar glass supplier Solar xinyi (HK:); Kingdee International Software (OTC :), which provides enterprise resource planning (ERP); and Lenovo (OTC :), which makes personal computers and mobile internet devices, is among the best animus on the list.
CHIK is down 3.2% over the past 52 weeks and 13.6% YTD. It also hit a 52-week low on October 6. The fund’s price-to-earnings (P / E) and price-to-book (P / B) ratios are 21.86x and 2.28x. Interested readers might consider investing around these levels.
2. ETF SPDR S&P China
- Current price: $ 112.26
- 52 week range: $ 106.42 – $ 156.29
- Dividend yield: 1.15%
- Expense ratio: 0.59% per year
The SPDR® S&P China ETF (NYSE 🙂 invests both in “China A-Shares” as well as in companies that trade as American Depositary Receipts (ADRs) in the United States. Most of our readers know that Chinese A-shares are RMB-denominated stocks that trade on the Shanghai and Shenzhen stock exchanges.
GXC, which holds 897 holdings, tracks the returns of the S&P China BMI Index. The fund started trading in March 2007.
Companies in the consumer discretionary sector make up the highest share at 29.16%. Next come communication services (16.96%), financial services (13.34%), health care (7.98%). The top 10 names represent about 40% of the net assets of $ 1.69 billion.
Leading company in social media and entertainment Tencent; heavyweights of e-commerce Ali Baba and JD.com; food ordering and delivery platform Meituan (OTC:); group of electric vehicles (EV) Nio; and Construction Bank of China (OTC 🙂 are among the largest companies in the fund.
Over the past 12 months, GXC has fallen nearly 14% and lost more than 13.8% since January 2021. The trailing P / E and P / B ratios stand at 11.90x and 1.72x. Investors who believe the decline in Chinese stocks may end soon should do more research on the ETF.