Which China ETF?

Simon Brown ETF Blog, Latest

China

China

Sygnia launched a new ETF covering China in April (JSE code: SYGCN). With the Satrix China ETF (JSE code: STXCHN) from August 2020, we now have two ETFs covering the same region and it’s worth looking at the differences.

The first key point is that they use different indices to track China. If the underlying indices were the same then the choice between the two simple becomes one of TER.

Sygnia uses the “S&P New China Sectors Index. The S&P New China Sectors Index measures the performance of China and Hong Kong-domiciled companies in consumption- and service-oriented industries. All Chinese share classes, including A-shares and offshore listings, are eligible for inclusion”

Satrix uses ” MSCI China Index captures large and mid-cap representation across China A shares, H shares, B shares, Red chips, P chips and foreign listing (e.g ADRs) and covers about 85% of China equity universe”

So the Sygnia ETF is slightly more niche in that it focuses on services and consumption whereas the Satrix index is all sectors.

As for the TER, Sygnia is projected to be 0.5% while the Satrix is 0.63% so Sygnia is slightly cheaper but that 0.5% is only a projection as the ETF doesn’t have a full year’s history as yet.

Both ETFs have Tencent as the largest holding, but in different weightings with the rest of the top 10 again largely the same but again different weighting. Importantly the Satrix data is from December 2021 and Tencent has been under pressure since then so likely that weighting will be lower.

Sygnia top10 holdings

Sygnia China ETF Top10 as at 20 April 2022

Sygnia China ETF Top10 as at 20 April 2022

Satrix top10 holdings

Satrix China ETF Top10 as at 31 December 2021

Satrix China ETF Top10 as at 31 December 2021

The question then of course is which is better? I like the focus on services and consumption and with a slightly cheaper TER, the Sygnia would be my pick. That said I don’t invest in niche regional ETFs and I get China exposure via the Top40 (via Tencent) and my offshore global ETFs.

For those hating on China as the STXCHN has been falling, I’ll refer you to this recent blog post about collapsing ETFs and how we should respond. Sure China has been cracking down on the tech industry and is struggling with their zero covid policy. But always remember – ETF investing is really about the long-term, not just a couple of years.

Simon


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.



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