Fund flows
Inflows to China’s technology ETFs have remained stable even though investors have been worried about the country’s growth. This sector has been relatively unaffected by economic slowdowns and has managed to attract considerable international investments. Investors in emerging markets are betting on rising consumer spending and technological growth in these economies. This will likely drive Internet stocks like Tencent Holding (TCEHY), Alibaba (BABA), Baidu (BIDU) and JD.com (JD).
Further, due to its large population, China has the world’s largest Internet population, thus leading to a huge e-commerce opportunity. Further, the government is shifting focus from an economy driven by manufacturing to a services based foundation. This will also push investments into the technology space. Ever since Alibaba, the leading Chinese e-commerce company listed its IPO on the New York Stock Exchange, China’s tech companies have lined-up for IPOs in the US to attract foreign investors.
Fund managers of tech ETFs expect these portfolios to gain from President Xi Jinping’s vision of a country dominated by high-value technology companies and less reliant on traditional industries such as manufacturing and construction. While the shift may happen slowly, investors are already moving in on the trend.
Foreign institutional investors have pulled out 78 million from the iShares China Large Cap ETF (FXI) in 2017 so far. However, investor interest in China’s technology ETFs is high.
The Guggenheim China Technology ETF (CQQQ) has seen inflows amounting to $12 million in YTD 2017. The KraneShares China Internet ETF (KWEB) has received $60 million in net inflows YTD.
