China
US tech has had an astounding year so far as the Nasdaq trades up some 40$ year-to-date. And sure tech is the future and some form of Artificial intelligence (AI) is certainly the future, right now we have no idea who the longer term winners will be and hence valuations are tricky at best.
So what about Chinese tech?
Chinese leader Xi Jinping started a massive crack on on their local tech sector. It started with the forced cancelation of the Ant Group’s IPO in November 2020 which while not tech, this was a shot at Jack Ma and hs Alibaba Group who owned a majority stake in Ant Group.
From here there was restriction on new game releases, restrictions on the number of hours kids could spend on games and all the while the once highly valued Chinese tech sector was getting smashed.
The Chinese conference of last October seemed to signal a truce and then in July this year there was more peace declared as the Ant Group was fined US$1billion. A nasty fine, but suggesting things were all good from government.
So time to invest into Chinese tech? I spoke with Petri Redelinghuys Herenya Capital last week and he suggested two US listed ETFs that track Chinese tech with the Invesco China Technology ETF (NYSE code: CQQQ) the pure Chinese tech play.
The Top holding is Tencent (Hong Hong code: 700) at 9.96% which we know well in South Africa. This stock has been struggling due to the selling by Prosus (JSE code: PRX) but in time this will end.
Forward PE is ±29x which is not all bad for high growth tech, price/book is a fair 2.4x with practically no dividends to speak of.
Charts by KoyFin, click here for 15% off a two year subscription.
| ETF name | Invesco China Technology ETF |
| NYSE code | CQQQ |
| ETF issuer | Invesco |
| Issue date | 12 August 2009 |
| Total investment cost | 0.70% |
| ETF Benchmark | FTSE China Incl A 25% Technology Capped Index |
| Tax-free savings account | NO |
| ETF major holdings | Tencent, Meituan, Baidu and Kuaishou Technology. |
| Market cap | US$878million |
| Performance 1 year | -21.2% |
| Performance 3 years (annualised) | -14.4% |
| Performance 5 years (annualised) | -6.5% |
| Performance 10 years(annualised) | +5.3% |
| Dividend yield | 0.08% |
ETF blog
At Just One Lap, we are big fans of passive investment using ETFs. In this weekly blog, we discuss ETFs on the local market and the factors you need to consider when choosing an ETF. If you have wondered how one ETF differs from another, this is where you can find out. We explain which index each ETF tracks, what type of portfolio could benefit from holding each ETF, and how the costs will affect your bottom line.