The global trade tensions resulting from the US-China Trade War don’t appear to be subsiding, and I find myself wondering whether it’s time to sell my shares in the BetaShares Asia Technology Tigers ETF (ASX: ASIA).
About ETFs
Exchange-traded funds, or ETFs, are investment funds that are listed on a securities exchange and provide exposure to a range of shares or assets with a single purchase. The video below explains ETFs in more detail.
BetaShares ASIA ETF
The BetaShares Asia Technology Tigers ETF is a passive ETF that aims to track the performance of the Solactive Asia Ex-Japan Technology & Internet Tigers Index.
It does so by providing exposure to the 50 largest technology and online retail companies in Asia, around half of which are based in China.
From inception in September 2018 to 31st July 2019, the fund has returned only 1.25% after the 0.69% management fee.
This is due to large declines in the share prices of some of the ETF’s largest holdings, including Tencent Holdings Ltd (HKG: 0700), Alibaba Group Holding Ltd (NYSE: BABA), Baidu Inc
(NASDAQ: BIDU) and Samsung Electronics Co Ltd (KRX: 005930).
The Case For Holding
While trade tensions are increasingly weighing on investors’ minds, it should be noted that China’s largest tech companies are somewhat insulated from tariffs. As far as Tencent, Alibaba and Baidu go, most of their revenue is generated domestically from ads, e-commerce and social media.
All of these companies are also based in sectors that are positioned for growth. For example, according to eMarketer, digital ad spending is predicted to grow by 22% in 2019 and will account for more than 75% of paid media outlays in China by 2021.
A report from Forrester estimated that China’s online retail market will reach $1.8 trillion by 2022, more than doubling the US market.
With China’s growing population and an appetite for the latest tech, these industry leaders should continue to see strong demand and growth.
Summary
There are certainly concerning factors when it comes to Chinese tech, such as the increased scrutiny from the US, Europe and even the Chinese government itself. However, over the long-term, I don’t think it’s a good idea to ignore the world’s largest market and some of the most innovative companies.
For now, I won’t be selling. For our number one ETF pick, have a look at the free report below.
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Disclosure: At the time of writing, Max owns shares in the BetaShares ASIA ETF.
