Why Chinese ETFs?
There are more Internet users in China than the total population of the United States. In many ways these users are driving the performance of a number of Chinese tech ETFs. Internet usage is expected to continue to grow exponentially as internet penetration as a proportion of the total population is still low in China when compared to developed countries. Growth in internet users will likely lead to increasing demand for mobile gaming, social media, and e-commerce thereby benefitting the technology sector. Furthermore, China is creating somewhat of a name for itself in global technology, and pushing well beyond the domestic market.
The iShares China Large-Cap ETF (FXI) is the largest U.S. based ETF focused on China. With $3.1 billion under management, this ETF invests in a basket of 50 large cap securities and seeks to track the FTSE China 50 Index. This ETF’s portfolio is highly concentrated in two stocks — Tencent Holdings (TCEHY) and China Construction Bank (CICHY). These two stocks make up nearly 20% of its holdings. The technology sector makes up 20% of the FXI portfolio. Year to date, shares of the FXI ETF have surged 11.3%.
The Global X NASDAQ China Technology ETF (QQQC) provides investors concentrated exposure to China’s booming technology sector. The QQQC ETF is slightly tilted towards small-cap stocks. It also invests in the popular US listed Internet-based stocks like Baidu (BIDU), Sina (SINA), Net Ease (NTES), and Sohu.com (SOHU). It has AUM of $20 million, as this sector is yet to attract ETF investors en masse. Year to date, this ETF has returned 10.4%.
Guggenheim China Technology ETF (CQQQ) invests in a portfolio of cap-weighted Chinese technology stocks. With an AUM of $90 million, it is the bigger among the two Chinese technology ETFs and carries low fund-closure risk. It invests in a range of companies from the technology sector ranging from large and mega cap Internet companies to smaller cap solar based stocks. Year to date, shares of this ETF have returned 24.8%.
The Krane Shares China Internet ETF (KWEB) invests in a basket of internet based stocks. YTD this ETF has gained 30% and outperformed all major markets.