Introduction
On 13th April 2021, we had published an article: “China Tech Stocks are down 27% since Feb 2021, should you invest now?”
As long-term investors, we do see a strong basis for building up exposure to China Tech stocks now. While fundamental risks to the sector remain elevated, we believe they have already been priced into current valuations and we would personally be gradually accumulating from here. At the margin, we see some of the key risks receding, and this may catalyze stock price consolidation for the sector.
In this article, we reveal which ETFs are optimal for investing into the sector, and the China Tech stocks with the highest implied upside to analyst consensus target prices.
Article Summary
1) Best ETFs for China Tech exposure
2) For SGD Investors: Lion-OCBC Securities Hang Seng TECH ETF
3) Which ETFs would we invest in?
4) China Tech Stocks with the largest implied upside to analyst consensus target prices
1) Best ETFs for China Tech exposure
Investing in China Tech stocks via ETFs can be relatively complex. There are nuances to index construction methodology, and the understanding of what constitutes “tech” might differ across various index compilers.
For example, many consider Alibaba to be one of China’s largest Tech companies and an investor might be keen to get exposure to it…but did you know Alibaba is NOT held by a number of China Tech ETFs, such as the widely used Invesco China Technology ETF (CQQQ US), or the Global X MSCI China Information Technology ETF (CHIK US)?
Hence, we have shortlisted 4 China Tech ETFs that cater to varying investor preferences, such as:
- Business model: Software vs Hardware tech stocks
- Listing venue of the stocks held by the ETF: ADRs vs A-Shares vs H-Shares
- Where the ETF is traded and the currency it trades in: USD vs HKD
Our 4 shortlisted China Tech ETFs are…
- Invesco China Technology ETF (CQQQ US)
- Global X MSCI China Information Technology ETF (CHIK US)
- KraneShares CSI China Internet ETF (KWEB US)
- iShares Hang Seng TECH ETF (3067 HK)
In the below image, we list the ticker codes of the shortlisted ETFs in yellow font, the type of stocks the ETF can invest in, the number of stocks held by the ETF, the ETF’s investment mandate, and the currency that the ETF trades in.
To explain briefly on the “stock types”, American Depository Receipts (ADRs) trade on US stock exchanges and denominated in USD, A-shares are listed on Mainland China stock exchanges, while H-shares are listed on the Hong Kong Stock Exchange.
