Last year, the communication services sector, a refreshed view on the old telecommunications sector, debuted as the newest S&P 500 sector. Today, the group is the fourth-largest sector weight in the S&P 500 and some data points indicate investors have been quick to access the new sector via exchange traded funds.
For example, the Communication Services Select Sector SPDR Fund (NYSEArca: XLC) debuted last June and already has over $4 billion in assets under management. XLC has some advantages. It was the first communication services ETF to come to market and it is home to beloved stocks, such as Facebook Inc. (NASDSQ: FB), Alphabet Inc. (NASDAQ: GOOG) and Netflix, Inc. (NASDAQ: NFLX).
However, XLC is not the only communication services ETF on the market. Nor is the sector restricted to the U.S. There are ex-US opportunities with this group, including in China via the newly minted Global X MSCI China Communication Services ETF (NASDAQ: CHIC).
Why China For Communication Services
CHIC, which is just two months old, follows the MSCI China Communication Services 10/50 Index. In China, the communication services sector is the third-largest sector weight in broader equity benchmarks. There are compelling fundamental reason why tactical investors should consider CHIC.
“Overall, analysts anticipate that China’s Communication Services will deliver higher revenue growth versus its US counterpart, owing to several thematic tailwinds, including deepening internet penetration, rising wages & consumption, changing consumer habits to favor new technologies, and government support,” according to Global X research.
CHIC holds 27 stocks, including familiar names such as Tencent Holdings Ltd. (OTC: TCEHY), China Mobile Ltd. (NYSE: CHL) and Netease Inc. (NASDAQ: NTES). The fund is off to a solid start, having returned more than 9% this year while amassing $27 million in assets under management.
“China’s Communication Services sector includes a host of innovative internet, social media, streaming, gaming, and telecom companies that have been driving the country’s efforts to become a global technology powerhouse,” notes Global X.
While most of CHIC’s holdings are not owned by the Chinese government, the government there is supportive of the communication services and that could benefit investors.
“A common theme among high-growth potential sectors in China is that the government helps accelerate expansion through a variety of supportive policies. For the Communication Services sector, the government has advanced a series of measures supporting its growth, from consumption stimulus to internet infrastructure, technological innovation, and deregulation,” according to Global X.
For more information on the Chinese markets, visit our China category.