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Max Manturov

Max Manturov

Head of investment research regulated by CySec

Five liquid ETFs for those looking to invest in China

Over the last couple of months, Chinese companies have been under significant pressure - several factors contribute to this. The chief among them is that the local regulators are tightening scrutiny on technology companies.

Among those affected have been:

● Giants with huge monopolistic influence - Alibaba, Baidu, Tencent, JD.Com.

● EdTech companies - TAL Education, New Oriental Education, Gaotu Techedu.

● Gaming companies - Tencent, NetEase.

Alongside this, companies that have recently IPOed on US stock exchanges, or are about to do so, are also facing problems. The most prominent example is Didi - the Chinese taxi aggregator. As a result, companies in related sectors and businesses have also come under pressure, as investors have begun to partially reduce their positions against such a negative backdrop.

The restrictions may create some challenges for the Chinese technology companies in the short term, but it is unclear how severe they will be. It is highly likely that, over time, corporations will be able to adapt to the new environment and continue to build their influence. This is especially true for technology giants with impressive capital and high levels of consumer loyalty.

The current drawdown in the Chinese market could therefore be an excellent opportunity to acquire or increase the share of the Chinese issuers in your portfolio. In this case, a viable investment option is to purchase the ETFs, which allocate their funds among the Chinese companies and, through diversification, significantly reduce the risk. We have made a selection of five of the largest and most popular ETFs.

Before buying, we recommend that you read the key information documents (KIDs) of the funds.


KraneShares CSI China Internet ETF

Key facts:

Ticker: KWEB.US.

Index - CSI Overseas China Internet .

Current price - $48.8.

Assets under management, AUM - $7.38 billion.

Dividend yield - 0.44%.

Expense Ratio - 0.76%.

The number of names in the ETF is 52.

Companies with the largest allocation to ETFs:

● Tencent Holdings Ltd. - 10,64%.

● Alibaba Group Holding Ltd. - 8,91%.

● JD.com - 8.35%.

● Pinduoduo - 8.12%.

● Meituan - 8.09%.

The average P/E Ratio for the portfolio is 30.3x.

The ETF's year-to-date return is (-36.81%).

Read more about this ETF at KID.


iShares MSCI China ETF

Key facts:

Ticker: MCHI.US.

Index Tracked - MSCI China.

Current price - $68.7.

Assets under management, AUM - $6.19 billion.

Dividend yield - 1.11%.

Expense Ratio - 0.59%.

The number of names in the ETF is 613.

Companies with the largest allocation to ETFs:

● Tencent Holdings Ltd. - 12,44%.

● Alibaba Group Holding Ltd. - 11,05%.

● Meituan - 4.53%.

● China Construction Bank Corporation - 2.52%.

● JD.com - 2.45%.

The average P/E Ratio for the portfolio is 17.2x.

The ETF's year-to-date return is (-14.17%).

Read more about this ETF at KID.


iShares China Large-Cap ETF

Key facts:

Ticker: FXI.US.

Index Tracked - FTSE China 50 Net Tax USD..

Current price is $39.7.

Assets under management, AUM - $4.79 billion.

Dividend yield - 2.07%.

Expense Ratio - 0.74%.

The number of names in the ETF is 52.

Companies with the largest allocation to ETFs:

● Meituan - 8.17%.

● Tencent Holdings Ltd. – 8.08%.

● Alibaba Group Holding Ltd. – 7.90%.

● China Construction Bank Corporation - 6.24%.

● JD.com - 5.20%.

The average P/E Ratio for the portfolio is 14.9x.

The ETF's year-to-date return is (-13.01%).

Read more about this ETF at KID.


Xtrackers Harvest CSI 300 China A-Shares ETF

Key facts:

Ticker: ASHR.US.

Index Tracked - CSI 300 Index..

Current price - $37.9.

Assets under management, AUM - $2.4 billion.

Dividend yield - 0.84%.

Expense Ratio - 0.65%.

The number of names in the ETF is 292.

Companies with the largest allocation to ETFs:

● Kweichow Moutai Co. - 5.25%.

● China Merchants Bank Co - 3.28%.

● Ping An Insurance (Group) Company of China - 2.72%.

● Wuliangye Yibin Co - 2.02%.

● LONGi Green Energy Technology Co - 1.82%.

The average P/E Ratio of the portfolio is 18.0x.

The ETF's year-to-date return is (-4.02%).

Read more about this ETF at KID.


SPDR S&P China ETF

Key facts:

Ticker: GXC.US.

Index Tracked - S&P China BMI Index..

Current price is $112.6.

Assets under management, AUM - $1.76 billion.

Dividend yield - 1.11%.

Expense Ratio - 0.59%.

The number of names in the ETF is 825.

Companies with the largest allocation to ETFs:

● Tencent Holdings Ltd. - 11,55%.

● Alibaba Group Holding Ltd. - 9,48%.

● Meituan - 4.15%.

● JD.com - 2.28%.

● China Construction Bank Corporation - 2.27%.

The average P/E Ratio for the portfolio is 13.3x.

The ETF's year-to-date return is (-12.33%).

Read more about this ETF at KID.


How to Buy ETFs?

If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.

After opening an account, you can buy ETFs in either of the following ways:

Freedom24 Web Platform: In the Web Terminal section, type in the search box, and select the appropriate ETF in the results. Open a secure session in the trading window on the right, select the number of securities you want to buy, and click Buy.

Freedom24 iPhone or Android App: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that will show up, type and select the appropriate ETF in the results. You will then see the ETF in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of securities you want to buy and click Buy.


Go to Freedom24 web platform >>


*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Europe Ltd. or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance Europe Ltd. do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance Europe Ltd. and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.



  • Sources of information

    https://www.investing.com/indices/csi-overseas-china-internet-components

    https://kraneshares.com/kweb/

    https://www.investing.com/indices/msci-china

    https://www.ishares.com/us/products/239619/ishares-msci-china-etf

    https://www.investing.com/indices/china-50-net-tax-usd-chart

    https://www.ishares.com/us/products/239536/ishares-china-largecap-etf?qt=FXI

    https://etf.dws.com/en-us/ASHR-harvest-csi-300-china-a-shares-etf/

    https://www.investing.com/indices/csi300

    https://www.spglobal.com/spdji/en/indices/equity/sp-china-bmi/#overview

    https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-sp-china-etf-gxc

  • Recommendation Evaluation Methodology
    Freedom Finance analysts perform a three-stage analysis. They select a promising industry based on the latest news, statistics and industry-specific metrics. They assess the supply and demand situation and its future development dynamics. Industry’s investment attractiveness is mostly affected by the forecasted market growth rates; total addressable market, player concentration level and likeliness of a monopoly formation, as well as the level of regulation by various entities or associations.

    The assessment is followed by the comparative analysis based on the selected sample. The sample comprises companies with a market capitalization of over USD 1 billion, but there is space for exceptions (when the suitable level of liquidity for company’s securities is available on the stock exchange). The selected companies (peers) are being compared against each other based on multipliers (EV/S, EV/EBITDA, PE, P/FCF, P/B), revenue growth rates, marginality and profitability (operating income margin, net income margin, ROE, ROA), and business performance.

    Having completed the comparative analysis, the analysts carry out a more in-depth research of the news about the selected company. They review company’s development policy, information about its current and potential mergers and acquisitions (M&A activity), and assess the efficiency of company's inorganic growth and other news about it over the past year. The main objective at this stage is to identify the growth drivers and evaluate their stability, as well as the extent of impact they have on the business.

    Based on all the data collected, the analysts determine the weighted forecasted figures of company’s growth rates and proposed business marginality, which are used to calculate the company’s multiplier-based estimated value. The said value enables setting the stock price target and stock value growth potential.

    The expected timing of the idea implementation is set depending on the current market situation, volatility level and available forecasting horizon for industry and company development. The forecasting period is normally set between 3 and 12 months.