China’s Communist Party Congress last month set China equities strategies ablaze as investors grew concerned that government interference and restrictive COVID policies would make the market “uninvestable.” Since then, those concerns have begun to recover, and with reports suggesting COVID-19 rules may become less disruptive, investors should keep an eye on a low fee China ETF like the Franklin FTSE China ETF (FLCH).
Following an incident in which a three-year-old boy died due to a possible gas leak in a quarantined residential compound, calls within China for fewer COVID-19 restrictions have popped up on the social media site Sina Weibo. At the same time, this week has seen e-commerce stocks like Alibaba (BABA) and JD.Com (JD) grow by more than 5% in part thanks to hopes for relaxed COVID-19 rules.
Those stocks as well as Tencent (TCEHY) and Baidu (BIDU) also have spiked this week as investors calmed since the party congress, with the fundamentals for e-commerce in China still strong and worth considering for investors’ portfolios. As a low fee China ETF, FLCH offers a very small cost for exposure to all four aforementioned holdings, which it accesses via the Hong Kong-listed shares of said stocks.
FLCH tracks the FTSE China RIC Capped Index which holds large and mid-size companies in China for the cost of just 19 basis points. FLCH holds TCEHY at 10.5%, BABA at 7.7%, JD at 2.9%, and BIDU at 1.4% among several other Chinese banks and construction-related firms. Almost 20% of its holdings fall into the finance sector, the largest sector in its holdings, followed by tech services at 16.6% and retail trade at 12.7%.
FLCH has seen its returns grow over the last quarter, seeing its performance increase by around 11% from its three-month performance period to its one-month return. The ETF has seen inflows all year, with $3 million in net inflows over the last two weeks.
China loosening its COVID-19 rules, combined with reports that Chinese policymakers want to press on with reforms to support growth, suggests there are opportunities in the Chinese economy. For those investors looking at China, keep an eye on FLCH.
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