China Exposure with a Tech Tilt: The Impressive 'CHIK' ETF

The world’s second largest economy appears laser-focused on becoming the dominant tech nation in the years to come. Investors looking to get exposure to China and leverage strength in technology can look to a fund like the 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.

At a 0.66% expense ratio, CHIK investors get:

  • Targeted Exposure: CHIK is a targeted play on the Information Technology Sector in China – the world’s second largest economy by GDP.
  • ETF Efficiency: In a single trade, CHIK delivers access to dozens of information technology companies within the MSCI China Index, providing investors an efficient vehicle to express a sector view on China.
  • All Share Exposure: The Index incorporates all eligible securities as per MSCI’s Global Investable Market Index Methodology, including China A, B and H shares, Red chips, P chips and foreign listings, among others.

Just to highlight the strength of China’s tech sector, pit it up against the broader MSCI China index. CHIK is up about 27% over the MSCI China index in the past 12 months.

CHIK Chart

China Diving Into Disruptive Tech

As the U.S.-China tech competition turns into a sort of technological arms race, look to both nations to start incorporating more disruptive technology like artificial intelligence (AI). China is already diving deep into AI.

“For AI, China’s unique advantage is the data from the largest internet population globally – 900 million and still increasing,” an article in The Diplomat noted. “AI runs on data and that correlation leads to a self-perpetuating cycle of consolidation in industries: the more data you have, the better your product. The better your product, the more users you gain. The more users you gain, the more data you have.”

“On blockchain, in April 2020, China’s central bank unveiled the world’s first sovereign digital currency that is based on blockchain-like technology,” the article added. “The background is that, in a speech October 2019 speech, Chinese President Xi Jinping declared blockchain would play ‘an important role in the next round of technological innovation and industrial transformation.’ That marked the first major world leader to issue such a strong endorsement of the widely hyped – but still unproven – distributed ledger technology (DLT).”

China is also delving into other areas of disruptive tech.

“Similarly, China is moving aggressively into cloud computing, 5G networks, driverless cars, and more cutting-edge technologies,” the article noted. “As Chinese digital economy expands overseas, its impact is felt across cyberspace.”

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