ETFs (exchange-traded funds) have not taken off in the same way as REITs. The SGX has 28 ETFs listed on it compared to around 40 REITs and property trusts. These 28 include dual-currency ETFs as some ETFs trade in US$ and Singapore dollars or RMB and Singapore dollars. In terms of liquidity too, ETFs lag those of S-REITs. However, they are useful vehicles for investing or trading in an unfamiliar market. ETFs can be bought and sold with ease via the trading platforms of local brokers. The only issue with ETFs traded on the SGX is that they are not as liquid as stocks and REITs.
An ETF typically aims to produce a return that tracks or replicates a specific index such as a stock index or commodity index. Such index-tracking ETFs are passively managed by ETF managers and do not try to outperform the underlying index. Index tracking ETFs have fees and charges that are usually lower than those of actively managed investment funds.
Technically, all the Chinese ETF charts look similar with sharp declines in a waterfall pattern (see charts) from end-February onwards. While they have reached their respective plunge pools and splashed, they could spend some weeks in their plunge pools before any sustained recovery is likely.
For investors who have missed out on the China tech play and do not have the time to trawl through 30 annual reports and financial statements, the Lion-OCBC Securities Hang Seng TECH Index ETF (HST) tracks the performance of the Hang Seng TECH Index. The ETF invests directly in all or substantially all, of the underlying Index Securities. The Hang Seng TECH Index tracks the 30 largest tech-themed companies listed in Hong Kong.
HST made its debut at $1.36 in 2020. Even after a spectacular rebound on March 16, HST traded at 71.3 cents. On March 15, it touched a low of 58.6 cents as short term RSI hit 10, an oversold low. The 58.6 cents level could turn out to be the trough of the downmove. Despite a sharp rebound on March 16–17, HST could ease and move sideways. However, it is an easy and convenient way to gain access to China’s tech sector.
The rush into electric vehicles (EVs) and lithium battery play is over. As cooler heads prevail, and countries and companies take pivoting to renewables seriously in the wake of the Russo-Ukraine war, investors may revisit this investment theme.
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One of the proxy plays of the EV-lithium theme is the NikkoAM-StraitsTrading MSCI China Electric Vehicles And Future Mobility ETF (EVS). This ETF tracks the MSCI China All Shares IMI Future Mobility Top 50 Index, giving investors exposure to companies involved in energy storage technologies (including EVs), autonomous vehicles, shared mobility and new transportation methods. EVS was listed earlier this year at 96.5 cents (there is a US dollar quote) and ended at 82.5 cents on March 16.
Some of EVS’s components are listed on Nasdaq, such as NIO and Li Auto. Geely Automobile and BYD Company are also in the MSCI China All Shares IMI Future Mobility Top 50 Index, as are Ganfeng Lithium Co, and Tianqi Lithium Corp.
Lion-OCBC Securities China Leaders ETF’s (stock quote: YYY) issue price was $2, trading down to $1.60 and closing at $1.77 as at March 16.
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YYY provides investors with access to 80 largest Chinese companies like Ping An Insurance, Kweichow Moutai, ICBC, Tencent and BYD. This ETF attempts to replicate the performance of the Hang Seng Stock Connect China 80 Index investing directly in all, or substantially all, of the underlying Index Securities. These 80 companies are listed in Hong Kong and/or Mainland China that are eligible for Northbound or Southbound trading under the Stock Connect schemes. A cautionary note on YYY: while this ETF is trading a lot lower than when it was first listed, there is no guarantee that it will go lower.
The United SSE 50 China ETF (JK8) tracks the performance of the SSE50 Index which consists of the 50 largest liquid stocks listed on the Shanghai Stock Exchange (SSE). JK8 shows the same chart pattern as HST and YYY.
