Overseas ETF investors have been skittish about putting their money in China this year, with its strict COVID controls and Beijing’s crackdown on the internet tech sector and real estate development over the last two years. However, there are some bright spots and tailwinds for the country that long-term investors should consider.
The market cap of non-state-owned companies in China has grown to around 47%, up from 35% a decade ago, abrdn’s investment director of multi-asset Louis Luo told CNBC. The abrdn executive added that he expects more market-friendly policies to return to the region, with consumption, green technology, and wealth management as sectors Luo thinks will see some long-term growth.
Plus, while China is currently facing a slowdown, its future appeal may lie in its ability to offer an alternative to investing in other countries. While global markets have been hit by the central banks aggressively raising interest rates to fight record-high inflation, the People’s Bank of China has gone in the opposite direction. According to Luo, a key difference between China and developed markets is that it can make its monetary policy independent of the United States.
“From that point of view, I think China stands up,” he said.
For investors who want to invest in China – and emerging markets – without putting money into state-owned enterprises, EMQQ Global’s flagship fund, the Emerging Markets Internet & Ecommerce ETF (NYSE Arca: EMQQ), may be a fund to consider. By focusing on the internet and e-commerce in emerging markets, EMQQ looks to capture the growth and innovation happening in some of the largest and fastest-growing populations in the world. More than half of the fund’s holdings (51.6% as of October 14) are weighted to China-based securities.
“Sentiment around China has been negative for so long that severe pessimism has set in. But the reality is that we are starting to see real green shoots and catalysts emerge,” said Kevin T. Carter, founder and CIO of EMQQ Global. “There are signs that the crackdown in the tech space is decelerating. Valuations are very low, and expectations are even lower. Companies in the space are buying back their own stocks at record levels.”
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