Will Senate Bill Stifle Gains for China ETFs? | ETF Trends

Chinese exchange-traded funds (ETFs) could be left in the cold should a Senate bill pass, which calls for more red tape when evaluating Chinese companies. From a due diligence standpoint, this is good news for the investor with a scrutinizing eye, but it also means that more Chinese companies could be mired in regulatory measures.

Chinese ETFs responded as such during the middle of the week as they traded lower on news of the bill.

“Exchange-traded funds that allow investors to bet on Chinese companies were knocked lower midday Wednesday after the U.S. Senate approved sweeping new legislation that could ultimately bar many Chinese companies from listing shares on U.S. exchanges,” a MarketWatch report said.

“The Senate bill, if it is written into law, would require Chinese companies to establish that they aren’t owned or controlled by a foreign government,” the report noted further. “Furthermore, they would be required to submit to an audit that can be reviewed by the Public Company Accounting Oversight Board, the nonprofit body that oversees audits of all U.S. companies that seek to raise money in public markets. U.S. stocks came off their highs of the session Wednesday afternoon following the passage of the bill, which comes amid increasing tensions between the U.S. and China, with representatives from the world’s biggest economies fighting over Beijing’s handling of the COVID-19 pandemic, which was first identified in Wuhan, China.”

Nonetheless, as China’s economy begins to recover following the pandemic, it still opens up the pathways for investors to get in, especially when it comes to the technology sector. With social distancing laws and lockdown measures, a reliance on technology has come to the forefront, which should benefit tech-focused funds.

Here are a few ETFs to consider:

  1. Global X MSCI China Information Technology ETF (CHIK): CHIK 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.
  2. KraneShares CSI China Internet Fund (NasdaqGM: KWEB): KWEB tracks a portfolio of Chinese internet and internet-related companies. The portfolio includes Chinese internet companies that provide similar services as Google, Facebook, Twitter, eBay, and Amazon.
  3. 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.

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