Now investors must consider the sovereign risk involved in holding this ETF. What happens to performance and valuations if the US moves to ban the products or services offered by these companies? The proposed ban on TikTok is just another example and follows the Huawei ban and the recent blacklisting of 241 Chinese companies by the US.
It is becoming increasingly difficult to ignore or discount the sustained attack on China on many fronts by the US. As much as we might want to say it has nothing to do with us, the reality is that this concerted attack will impact investment decisions and portfolio construction.
Consider an exchange-traded fund (ETF) that tracks Asia-tech companies through their US listings. It had a 30% return in 2020 and makes a very useful addition to an investment portfolio. It includes Tencent, Meituan Dianping, Alibaba and JD.com.
