Semiconductors are a strong play in today’s markets, but the addition of Chinese exposure and 5G could make for a particularly potent combination with the KraneShares CICC China 5G & Semiconductor ETF (KFVG).

5G relies on semiconductor technology, and as the economy re-opens, the two could feed off each other’s strengths. Add that to China’s ambitious goal to be technologically independent and KFVG could thrive.

“5G could be the ultimate ‘reopening’ theme, as consumers venture out and demand faster cellular broadband coverage and capacity versus last year’s dependence on Wi-Fi,” said Bank of America analysts in a CNBC article.

KFVG seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of a specific equity securities index, the CICC China 5G and Semiconductor Leaders Index. The fund will invest at least 80% of its total assets in components of the index, depositary receipts, including ADRs, representing such components and securities underlying depositary receipts in the index.

The index includes the stocks and depositary receipts of the top 30 companies by free-float market capitalization of Chinese companies engaged in 5G and semiconductor-related Industries.

Benefits of KFVG, as highlighted on the KraneShares website:

  • Access to China’s 5G and semiconductor companies that offer a potential source of uncorrelated, long-term growth.
  • Exposure to Chinese technology companies listed in Mainland China, Hong Kong, and the United States.
  • Access to an index developed by China International Capital Corporation (CICC) Research. CICC is a leading, publicly traded, Chinese financial services company with expertise in research, asset management, investment banking, private equity and wealth management.

KFVG Chart

VCs Getting In on Chip Action

Venture capitalists are taking a closer look at the semiconductor sector, particularly in China and the United States. The two top economies are vying for technological dominance, which will require computing power and the need for chips.

“Even as the world’s leading chipmakers scramble to solve critical supply bottlenecks, a new wave of semiconductor startups has been quietly lining up massive sums of venture capital in their quest to design the next generation of chips,” a Pitchbook article said. “Startups in China and the US have been subject to a venture capital land grab from investors who believe nascent chip designs will propel a future ruled by artificial intelligence and machine learning.”

“Global VC investment in semiconductor companies set a quarterly record for deal value at $2.64 billion in the first three months of 2021, with 70% of the funding going toward Chinese companies, according to PitchBook data,” the article added.

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