Chinese technology stocks and related ETFs could outperform as Chinese firms with greater overseas businesses and foreign-currency assets benefit from the ongoing yuan depreciation.
Kinger Lau, Hong Kong-based chief China equity strategist at Goldman Sachs, argued that China’s tech sector could profit the most from a depreciating yuan since over 35% of the company revenues are generated from overseas markets, Bloomberg reports.
The Chinese yuan has been depreciating as the U.S. dollar strengthened over the past week in response to a Donald Trump presidency. The U.S. dollar has already strengthened 1.3% against the Chinese yuan to from CNY6.8804 from CNY6.787 since the November 8 election.
“Our conviction for firms with foreign-currency financial assets to outperform is even higher after Trump’s election victory, as our conviction to expect a weaker currency is stronger,” Lau told Bloomberg. “The Trump presidency means some pure exporters could have a little bit of difficulty to outperform because of the trade concerns in the short term.”
[related_stories]Investors interested in gaining targeted exposure to Chinese technology companies have a number of options available, including the KraneShares CSI China Internet Fund (NasdaqGM: KWEB), Guggenheim China Technology ETF (NYSEArca: CQQQ), Global X NASDAQ China Technology ETF (NasdaqGM: QQQC) and Emerging Markets Internet & Ecommerce ETF (NYSEArca: EMQQ).
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, more aggressive investors may utilize something like the Direxion Daily CSI China Internet Index Bull 2X Shares (NYSEArca: CWEB), which tracks the same underlying benchmark as KWEB but with a 200% kicker, to gain a bullish leveraged long approach to the growing Chinese internet industry.
For more information on the Chinese markets, visit our China category.
KraneShares CSI China Internet Fund