Over the past year, Chinese assets have attracted renewed attention. Mainland equities rallied (the Shanghai Composite climbed above 3,800), and Hong Kong-listed stocks staged a recovery amid supportive policy signals and the return of some China-related listings. At the same time, markets that remain volatile—sharp upswings can be followed by swift drawdowns (for example, a notable sell-off in early September). Many investors who focus solely on equities find they can make gains quickly — and lose them just as fast.
That makes a more resilient approach worth considering. Rather than relying on single-asset bets, a simple cross-asset framework combining equities, bonds and commodities can improve stability without sacrificing exposure to upside. Below is a concise, practitioner-oriented presentation of this “triangle” allocation and how to implement it using ETFs.
Bonds (ETF): The Portfolio’s Defensive Core
Bonds play the defensive role in a portfolio. Through bond ETFs investors can access different credit and duration profiles: sovereign (government) bonds typically offer the lowest credit risk, local or provincial government bonds may provide a modest yield pickup, and corporate (credit) bonds carry higher yield and greater sensitivity to economic cycles.
The value of bond exposure is not rapid capital appreciation but steadiness—regular income and lower volatility. During equity market stress, bond holdings can act as ballast and reduce overall portfolio drawdown.
Commodities (ETF): Tactical Risk Hedges
Commodity ETFs—most commonly gold, silver and industrial metals such as copper—fulfill complementary roles:
Gold is often used as a defensive hedge and an inflation/credit-stress hedge;
Silver tends to be more volatile than gold and can amplify short-term directional moves;
Copper and other base metals are closely tied to industrial activity and serve as economic cycle indicators.
Allocating a portion of the portfolio to commodity ETFs can provide protection when equities falter or when inflation/repricing risks emerge, improving resilience across different macro regimes.
The Power of the Triangle: Diversification through Correlation Management
The effectiveness of this framework depends on asset correlations. Equities supply growth potential, bonds supply income and stability, and commodities can provide non-correlated or negatively correlated returns in specific scenarios. Combining these exposures reduces the likelihood that one market’s move will dominate portfolio outcomes.
In other words, instead of “single-asset risk,” you get a complementary set of exposures: offensive (equities), defensive (bonds), and tactical/hedging (commodities).
Practical Implementation Tips
You don’t need complex formulas to put this into practice. Key operational steps:
Define your objective and risk tolerance (e.g., capital growth with downside protection vs. capital preservation with modest growth).
Use liquid, transparent ETFs to gain exposure.
Set simple rebalancing rules (for example, quarterly or when any sleeve deviates from its target band by X%).
Monitor macro variables that affect duration and real assets (interest rates, inflation expectations, industrial demand) and adjust duration or commodity weight as appropriate.
Think of this as a rules-based cross-asset allocation: maintain target weights, rebalance periodically, and use ETFs for efficient implementation.
Example ETF Menu (for reference only)
Below are representative ETFs that investors can consider as building blocks when accessing these exposures. These are illustrative examples of China-listed products and not recommendations.
Bond ETFs
Sovereign bond ETF: Shanghai 5-year Treasury ETF ( $SSE 5-YEAR TREASURY SECURITIES OF EXCHANGE-TRADED INVESTMENT FUNDS(511010)$ ) — low volatility, defensive core.
Local government bond ETF: Haitong 10-year Local Government Bond ETF ( $SHANGHAI 10 YEAR LOCAL GOVERNMENT DEBT TRADING OPEN INDEX SECURITIES INVESTMENT FUND(511270)$ ) — modest yield premium vs. sovereign.
Credit (corporate) bond ETF: China Asset Credit Bond ETF ( $HUAXIA STOCK EXCHANGE BENCHMARK MARKET MAKING CORPORATE BOND TRADING OPEN ENDED INDEX SECURITIES INVESTMENT FUND(511200)$ ) — higher coupon exposure; greater sensitivity to credit cycles.
Commodity ETFs
Gold ETF: Bosera Gold ETF ( $BOSERA GOLD EXCHANGE TRADED SECURITIES INVESTMENT FUND(159937)$ ) — classic defensive/hedge instrument.
Base-metals ETF: Dacheng Nonferrous Metals ETF ( $DACHENG NONFERROUS METAL FUTURES TRADING OPEN INDEX SECURITIES INVESTMENT FUND(159980)$ ) — cyclical exposure tied to economic activity.
Notes: ETFs track indices and offer transparent, tradable access compared with directly buying bonds or physical commodities. For many investors—especially those new to cross-asset allocation—ETFs provide a convenient set of building blocks to construct diversified portfolios.
Invest in China with Tiger—your one-stop solution
Bullish on China but not sure how to allocate? With one Tiger account, you can invest in a range of China-related assets:
A-shares Connect: $HUATAI-PINEBRIDGE CSI 300 INDEX TRADING SECURITIES INVESTMENT FUND(510300)$ ; $CARD IN 500 EXCHANGE-TRADED INDEX SECURITIES INVESTMENT FUND(510500)$ ; $E-FUND GEM TYPE OPEN INDEX TRADING SECURITIES INVESTMENT FUND(159915)$ $Contemporary Amperex Technology Co.,Ltd.(300750)$ ; $Kweichow Moutai Co.,Ltd.(600519)$
Hong Kong Market: $Xinjiang Tianshun Supply Chain Co.,Ltd.(002800)$ $HSCEI ETF(02828)$ $CAM MSCI A50(02839)$ ; $TENCENT(00700)$ , $MEITUAN-W(03690)$ , $CHINA MOBILE(00941)$
US Markets: $Xtrackers Harvest CSI 300 China A-Shares ETF(ASHR)$ , $KraneShares CSI China Internet ETF(KWEB)$ , $iShares China Large-Cap ETF(FXI)$ , $Alibaba(BABA)$ , $BIDU-SW(09888)$ $PDD Holdings Inc(PDD)$
In addition, Tiger Trade’s signature features—TigerAI and Recurring Investment—make it easier to build exposure to Chinese assets:
TigerAI Investment Assistant: New to Chinese assets? Ask anytime—e.g., “Which ETFs track the CSI 300?” or “Which China ADRs are trending lately?”—and get answers instantly.
Recurring Investments for HK stocks & ETFs: Worried about timing? Tiger Trade supports daily/weekly/monthly recurring plans for Hong Kong stocks and ETFs to average your cost, build long-term positions, and pursue steadier outcomes.
Disclaimer: This article provides market insights and investment ideas, not financial advice. Investing carries risks—please invest prudently.
Comments