The technology sector has stood out this year as investors turned to growth-oriented stocks in the ongoing bull market run. When looking at the tech segment, Chinese technology stocks and related exchange traded funds have dominated the global markets.
While the S&P 500 Technology Index has increased about 20% this year, the MSCI China Information Technology Index has surged more than 50%.
A number of factors are supporting the outperformance in Chinese technology company shares, such as the growing Chinese economy, the ongoing shift from an export-oriented economic model to greater domestic consumption and rising popularity of online shopping – according to official Chinese data, online sales of physical goods jumped 28.6% in the first six months of the year to 2.37 trillion yuan or $350 billion and now make up 8.5% of China’s overall retail sales.
Furthermore, many of these Chinese companies have diversified their businesses to capture greater growth potential. Many China tech companies have started out as social media firms that expanded through advertising, but they would also diverse into other areas like finance to help provide better diversification benefits, which have in turned helped greater investments.
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), along with the broader PowerShares Golden Dragon China Portfolio (NasdaqGM: PGJ).
KWEB tracks Chinese Internet and Internet-related companies that provide similar services like Google, Facebook, Twitter, eBay and Amazon, among others. These companies would benefit the most from the rising domestic consumption from China’s growing middle class.