Along with their U.S. counterparts, Asian technology giants and related exchange traded funds could continue to outperform as the coronavirus pandemic forced many to rely on digital devices and services to stay connected.
Asian tech companies saw strong profit or revenue growth during the Covid-19 pandemic, which has kept many people at home, online—working, meeting, shopping, and playing games, the Wall Street Journal reports.
Analysts and investors argue that Asia’s tech surge has broadly followed the rally in major U.S. technology companies as both sides have similarly benefited from pandemic-related business closures and lockdowns.
However, some point out that Asia tech companies are still cheaper than their U.S. peers, making them potentially more attractive after the run-up in U.S. valuations. For example, Alibaba has a forward price-to-earnings ratio of 27.7, compared to 85.4 for Amazon.com Inc.
“These companies are low-hanging fruits that (people) can easily invest in to play catch up, especially if they think they have missed the opportunities in the U.S. market,” Francis Tan, an investment strategist at UOB Private Bank, told the WSJ.
Manish Nigam, head of Asia Pacific technology research at Credit Suisse, also believed that the heightened trade and political tensions between the U.S. and China may be both a risk and an opportunity for Asian technology companies.
“If the U.S.-China relationship continues to get uglier, then tech could get hurt,” Nigam told the WSJ, adding that the rising tensions are also pushing Beijing to increase its own technological capabilities and to support the growth and development of domestic companies.
For those who believe these Asian tech names may continue to outperform, ETF investors can consider a technology-focused China country-specific exposure. As a way to help investors hone in on the China tech segment, Invesco offers a line of China country-specific ETFs, including the focused Invesco China Technology ETF (NYSEArca: CQQQ). CQQQ is based on the AlphaShares China Technology Index, which is designed to measure the performance of the investable universe of publicly-traded information technology companies open to foreign investment that are based in mainland China, Hong Kong, or Macau.
The broader Invesco Golden Dragon China ETF (NasdaqGM: PGJ), which tracks the NASDAQ Golden Dragon China Index, includes a hefty tilt toward communication services names.
Additionally, investors can look to other options such as the Global X MSCI China Information Technology ETF (CHIK), which tries to reflect the performance of the large- and mid-capitalization segments of the MSCI China Index that are classified in the Information Technology Sector as per the Global Industry Classification System, and the KraneShares CSI China Internet Fund (NasdaqGM: KWEB), which tracks a portfolio of Chinese internet and internet-related companies.
For more information on the Chinese markets, visit our China category.