Hong Kong’s End of COVID Travel Restrictions A Boon for Business | ETF Trends

Hong Kong’s chief executive John Lee has announced an official end to the COVID quarantine requirements for travelers entering the territory as focus shifts away from a COVID zero policy mirrored on the Mainland and instead prioritizes economic support and growth.

Hong Kong is home to a burgeoning tech sector and the Hong Kong Stock Exchange is the primary contact for Mainland China investing for many foreign investors. The city has been largely cut off from both Mainland China and the world since the onset of the pandemic in 2020 and with the dissolution of quarantine requirements for travelers, the hope is that it will be a major boost to businesses as travel resumes.

“We want to balance the need for controlling the epidemic… [with the need] to raise Hong Kong’s competitiveness,” said Lee in the announcement.

The announcement came with the full support from top Beijing officials and speculation has already begun as to if it is the first step in the Mainland considering lowering its requirements. Current travel policies are seven days of quarantine in an approved location for all incoming travelers as well as three days of at-home monitoring, and Hong Kong could be a test run for Mainland authorities to gather data on risk and contagion potential.

“We cannot predict what is going to happen for mainland China’s zero-COVID policy based on what Hong Kong is doing,” cautioned Yanzhong Huang, a public health policy expert at the Council on Foreign Relations based out of New York.

COVID restrictions have prompted more than 120,000 Hong Kong residents to leave the city this year, and have severely reduced travel into and out of the city. The lifting of quarantine will be a boon, but travel to Hong Kong will still come with restrictions for incoming travelers that will prevent visiting bars and restaurants for the first three days, mandatory COVID testing for a week, and the risk of those testing positive moved to government facilities.

For now, travel between Hong Kong and Mainland China remains essentially closed.

“Hong Kong’s easing of COVID restrictions, however, will mean the border between Hong Kong and the mainland will remain tightly under Covid controls for the foreseeable future,” said Xinran Andy Chen, senior analyst at Trivium, a China consultancy.

Investing in Hong Kong’s Technology Giants With KTEC

For investors seeking exposure to Hong Kong’s tech sector that stands to benefit from a return to travel, the KraneShares Hang Seng TECH Index ETF (KTEC) offers exposure to internet stocks, e-commerce companies, fintech firms, and other tech-related companies.

KTEC seeks to track the Hang Seng TECH Index which includes the 30 technology companies in Hong Kong’s burgeoning tech sector with the highest free float market capitalization. The fund invests primarily in China H shares — meaning shares of stocks that are incorporated in mainland China and trade on the Hong Kong Stock Exchange.

Companies that qualify for the index must all meet one of three criteria: They must be “technology-enabled,” meaning they operate primarily from a mobile or internet platform; they must have an R&D expenses-to-revenue ratio that is equal to or greater than 5%, or they must have year-over-year growth equal to or greater than 10%. No single stock has more than 8% weight in the index.

The top three holdings in KTEC include Meituan, a major e-commerce platform, at 8.86%; Alibaba (8.42%), an e-commerce, retail, and internet tech giant; and Tencent Holdings LTD (8.36%), a multinational technology and entertainment company.

KTEC has an expense ratio of 0.68%.

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