China’s economic outlook has returned to Western media headlines, and for good reason. The July Politburo meeting highlighted a fading reopening bounce, with expectations that the Chinese government will have to take policy steps and structural reforms to boost demand and improve overall market sentiment. That said, investors can still find exciting opportunities in strategies like the China clean tech ETF KGRN.
Yes, China’s 5% growth target has taken hits from youth unemployment and a growing savings rate. Real estate, too, still looks focused on unwinding ongoing structural issues. Clean energy technologies and clean tech investing, however, still offer a significant positive opportunity set. China led the world in clean energy investing in 2022, with almost half of total low-carbon spending happening there. China overall spent more than half a trillion dollars on solar and wind energy, EVs, and batteries.
That dwarfs U.S. clean energy spending, which only just surpassed $140 billion. That gap also belies the domestic media excitement surrounding the Biden administration’s domestic clean energy investments, as appealing as that may be. What’s more, the country looks set to blow past its wind and solar targets five years ahead of time.
Taken together, the positivity surrounding the clean energy tech sector in China should draw investors’ attention to a China clean tech ETF. KGRN, the KraneShares MSCI China Clean Technology Index ETF, could be that ETF. KGRN tracks the MSCI China IMI Environment 10/40 Index, charging 78 basis points (bps) for its approach.
The index includes Chinese firms that derive at least 50% of revenue from environmentally friendly products and services. That mainly focuses on clean tech revenue in alternative energy, energy efficiency, and green building. It does, however, also include anti-pollution and sustainable water-focused firms. That approach has helped KGRN return 11.3% YTD and 8.7% over the last month.
Nearing the $100 million ETF AUM mark, KGRN can present one exciting way to buck economic angst in recent China coverage. KGRN is sending a key buy signal as well, suggesting that investors looking to boost their China exposure may want to keep an eye on the burgeoning China clean tech ETF.
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