Is China Too Good An Opportunity To Miss?
๐๐๐ In recent times the Chinese markets have been subdued due to the ongoing property crisis, exacerbated by the Middle East War. On Monday, China 's blue chip index dropped to its lowest in over 4 years. But the latest news is that the Chinese government is set to approve slightly more than 1 Trillion Yuan or USD 137 billion in additional sovereign debt issuance this week. This is to spur infrastructure spending and encourage economic growth.
In recent weeks, Chinese authorities have introduced a raft of measures that included more public works spending, interest rate cuts, property easing and efforts to shore up the private sector, after China's growth momentum dropped.
Today US shares look expensive with the S&P500 trading at more than 30 times earnings while MSCI China is valued at just 10 times, the lowest in a decade.
China is leading the world in manufacturing and has become the world's factory because of its low labour costs, strong business eco system and stable government. It is also the world's second most populous country with a population of 1.425 billion people.
As a contrarian investor, I believe that this is a golden opportunity to invest in China. However I prefer to invest in a broad based Chinese ETF and $iShares MSCI China ETF(MCHI)$ is my Top Pick. MCHI tracks a market cap weighted index of 636 Chinese stocks which stretches across all market cap sizes. MCHI provides a broad based exposure to Chinese shares such as H shares, B shares, Red chips, P chips and foreign listings as well.
The Top 10 holdings include $TENCENT(00700)$
China Construction Bank, Netease, Ping An Insurance Group, BYD, Industrial & Commercial Bank and Baidu.
Tencent is China's most valuable publicly traded company. Tencent is the world's largest video game vendor. Its services include social networks, music, web portals, ECommerce, mobile games, Internet services, payment systems, smartphones and multi player online games.
Alibaba is well known for its ECommerce, Retail, Internet and Technology. It provides ECommerce sales services not only in China but globally as well. Alibaba is also into digital media and entertainment, logistics and cloud computing. It is also one of the largest financial services group under its Fintech Arm, ANT Group.
PDD is the fastest growing ECommerce company in China behind Alibaba and JD.com with a value for money emphasis. It also owns Duoduo groceries and Temu.
The expense ratio of MCHI is 0.58%. Dividends are paid half yearly. The current dividend yield is 2.7%.
Performance wise MCHI is down 13% year todate but up 6% in the past year. Wall Street Analysts has a Buy rating on MCHI with a Target price of USD 44.54, an upside potential of 10%.
In the short term, MCHI ETF may face volatility but in the long term, MCHI will continue to grow exponentially. This is not a Get Rich Quick kind of ETF but a Slow and Steady one. Time and patience are required for MCHI to realise its full potential.
To me, a well diversified portfolio should include Chinese stocks and MCHI is my tactical play on the future of China, the 2nd Superpower of the world.
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Good to know
Nice Article.