Traders have been dumping Chinese stocks traded on the Hong Kong exchange in the wake of pro-democracy protests. Consequently, Chinese stocks and related country-specific exchange traded funds are looking more attractive at these cheaper valuations after the bout of volatility.
Over the past week, China-related ETFs, including the iShares China Large-Cap ETF (NYSEArca: FXI), SPDR S&P China ETF (NYSEArca: GXC) and Powershares Golden Dragon Halter USX China Portfolio (NYSEArca: PGJ), have all declined over 3%.
After the sell-off, fund managers from Templeton Emerging Markets Group and Aberdeen Asset Management Plc are now prepared to purchase Hong Kong-listed shares that were indiscriminately dragged down along with the broader market, Bloomberg reports.
Many of these Chinese company stocks listed on the Hong Kong exchange were caught up in the sells, despite having little to no business exposure in Hong Kong. Since the mentioned China ETFs all track Chinese company stocks listed in Hong Kong, the FXI, GXC, and PGJ could all experience a rebound once the street clashes and volatility calm down.
Additionally, these China ETFs all show cheap valuations. FXI shows a price-to-earnings ratio of 7.9 and GXC has a P/E of 9.6.
“I am moving in,” Mark Mobius, who manages Templeton Asian Growth Fund (TEMFRBI), said. “The protest is important. It should not be ignored, but it won’t have an impact on China companies.”