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Over the past few decades, China has emerged as a tech superpower due to significant growth in innovative technologies like 5G, semiconductors, artificial intelligence (AI), military technology, and quantum computing. Thus, China technology ETFs can present a valid opportunity and mode to capitalise on this growth.
With its pool of highly skilled engineers and scientists, China has a competitive edge. Moreover, the nation’s policies are always conducive to tech development and testing innovations.
Earlier this year, Chinese Premier Li Keqiang stated, “The new system for mobilising resources nationwide should be improved, we should better leverage the role of the government in pooling resources to make key technological breakthroughs and enterprises should be the principal actors in innovation.”
The Chinese finances ministry said it would boost special funds for the industrial and manufacturing sectors by 4.4 bn yuan to 13.3 bn yuan ($1.93 bn) in 2023. Also, as per China’s New Industrialisation Acceleration Scheme, life and health technologies, AI, advanced manufacturing, and new energy technologies would receive increased support for new production facilities.
Due to its expansive market and rapidly evolving tech competence, China also challenges the technological dominance of the US. The tensions between the US and China are escalating, but it is not likely to impact the latter’s tech ambitions much.
Top China Technology ETFs to consider
As Chinese tech companies are set to grow bolstered by the government’s support, investors looking to capture this growth can look at China technology ETFs. Here we have listed four of them investors could consider opting for.
Invesco MSCI China Technology All Shares Stock Connect UCITS ETF
Launched in June 2011, the Invesco MSCI China Technology All Shares Stock Connect UCITS ETF focuses on innovative technology companies in China. The fund is passively managed and tracks the MSCI China All Shares Stock Connect Index which includes the large and mid-cap Chinese technology stocks.
Most of these companies belong to high-growth sectors like industrial automation, digital healthcare, autonomous technology, and mobility. The top holdings of the fund are Alibaba Group (11.1%), Tencent Holdings (10.07%), Meituan-B (9.58%), Contemporary Amperex Technology-A (5.03%), and Baidu Inc Class A (4.80%).*
The fund has an expense ratio of 0.49% and manages a fund size of $41.48 mn. It has generated a 1-year return of 5.91%. This ETF also has an ESG Fund Rating of BBB.*
iShares MSCI China Tech UCITS ETF
The iShares MSCI China Tech UCITS ETF USD (Acc) offers exposure to large and mid-cap Chinese technology companies. The sectors in which these companies operate include internet & direct marketing retail, interactive media & services, education services, and interactive home entertainment. The stocks included are compliant with the ESG (environmental, social, and corporate governance) norms as well. The ETF tracks the MSCI China Technology Sub-Industries ESG Screened Select Capped index.
It has a total of 197 holdings with the top five ones being PDD Holdings (10.04%), Netease Inc Ord (8.21%), Alibaba Group Holding (7.14%), Tencent Hldgs. Ltd (7.04%), and Xiaomi Corp (5.96%).*
Launched in December 2021, the ETF has assets under management worth $16.86 mn.* The expense ratio of the fund is 0.45%, while it has earned 6.45% returns in the one year between 30 September 2022 to 30 September 2023.
Global X China Robotics and AI ETF
Through the Global X China Robotics and AI ETF, investors can access high growth potential through companies playing a significant role in robotics and artificial intelligence development in China. The fund was launched in August 2020. It tracks the FactSet China Robotics and Artificial Intelligence Index.
The ETF has a total of 25 securities, with the most weightage commanded by Hangzhou Hikvision Digital (7.97%), Nari Technology Co Ltd (7.43%), Zhejiang Dahua Technology (7.41%), Iflytek Co Ltd. (7.04%), and Shenzhen Inovance Technology (6.74%) *.
The Global X China Robotics and AI ETF has an asset base of $15.73 mn. The expense ratio for the fund is 0.68%. and it has generated returns of -4.58% over the past year.*
KraneShares Hang Seng TECH Index ETF (KTEC)
Launched in June 2021, the KTEC replicates the Hang Seng TECH Index, which includes 30 top Hong Kong-listed large-cap technology stocks.
Most of the stocks in the fund have a strong exposure to 5G, semiconductors, e-commerce, Fintech, and Artificial Intelligence (AI). As of October 31, 2023, the top holdings of the KTEC include Xiaomi Corp. Class B (10.99%), Alibaba Group Holding (8.40%), Tencent Holdings (8.31%), Li Auto, Inc. Class A (7.89%), and Meituan Class B (7.68%).
The ETF by KraneShares has assets under management worth $5.7 mn. It has an expense ratio of 0.69% and has clocked in a 1-year return of 27.03%.
*as of November 3, 2023
**as of October 31, 2023
