With the dust settling after the China sell-off, Chinese tech stocks and related exchange traded funds have stood out this year, outperforming the broader emerging market.
Year-to-date, KraneShares CSI China Internet ETF (NasdaqGM: KWEB) rose 15.0%, Guggenheim China Technology ETF (NYSEArca: CQQQ) gained 4.6%, Global X NASDAQ China Technology ETF (NasdaqGM: QQQC) increased 5.1% and Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ) 4.2%.
These sector-specific ETFs target Chinese technology and internet names, like Tencent Holdings, Alibaba Group (NYSE: BABA) , Ctrip (NasdaqGS: CTRP) , Baidu (NasdaqGS: BIDU), JD (NasdaqGS: JD), NetEase (NasdaqGS: NTES), Lenovo Group and Qiho 360 Technology (NYSE: QIHO), among others.
Additionally, the broader Powershares Golden Dragon China Portfolio (NYSEArca: PGJ), which includes a 45.2% tilt toward information technology and 38.1% in consumer discretionary, has also outperformed other broad China ETFs. Year-to-date, PGJ gained 13.4%, whereas the iShares China Large-Cap ETF (NYSEArca: FXI), the largest China-related ETF, fell 5.1% and Deutsche X-trackers Harvest CSI 300 China A-Shares ETF (NYSEArca: ASHR), the largest China A-shares ETF, dipped 0.3%. Broad China ETFs typically overweight the financial sector, which makes up 51.9% of FXI and 39.2% of ASHR, and include less than 10% in the technology sector. [ETF Investors Surprising Reaction To China’s Rally]
More investors are jumping on the rising growth trend in Chinese technology companies. For instance, Gary Greenberg, who manages emerging-market stocks at Hermes Investment Management, has been shifting into Chinese e-commerce and internet search engines “in the past couple of months,” reports Maria Levitov for Bloomberg.
Greenberg argues that rising demand for services and goods among China’s rising middle class could support e-commerce giant Alibaba.
“The economy is going through a transformation,” Greenberg told Bloomberg. “We see two Chinas: an industrial China growing at about 2 percent and a service economy, growing at about 12.5. And each one accounts for about half of the total gross domestic product.”