Take a Look at Tech for Strategic Investing in China ETFs

When it comes to investing in China-focused exchange-traded funds (ETFs), rather than take a broad-based approach, it might be better to get sector-focused. That means taking a look at technology, which could benefit from the country’s latest reforms amid a post-Covid-19 recovery.

“In the middle of juggling the economic fallout of the Covid-19 pandemic, China faces rising geopolitical tensions that are putting investors on edge and clouding the outlook for markets,” a South China Morning Post article noted. “To counter these twin threats, policymakers are keen to reassure global investors that China remains a good venue for capital. They are picking up the pace of reforms to open up the capital market, driving stock market changes that will usher in a more technology-driven economic model.”

“Having taken their cue from successful US tech manufacturers, Chinese players know an efficient capital market is a crucial stepping stone for nurturing innovation. This is sparking a series of stock market reforms designed to bolster domestic tech firms,” the article added further. “At the heart of these measures are updates to registration-based public offering rules intended to make it easier for tech companies to list on local exchanges. These were first introduced on the Shanghai Star Market last summer. After a year of smooth sailing, this month, the new system has been expanded to the Shenzhen ChiNext board.”

As China looks towards more independence and less reliance on other nations for bolstering its technological initiatives, these ETFs are worth a look:

  1. 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.
  2. 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.
  3. 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.

A more broad, but still a specialized China ETF play is the Xtrackers CSI 300 China A-Shares ETF (NYSEArca: ASHR). The fund seeks investment results that correspond generally to the performance of the CSI 300 Index, which is designed to reflect the price fluctuation and performance of the China A-Share market and is composed of the 300 largest and most liquid stocks in the China A-Share market.

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