Recently, Chinese technology stocks have staged a strong rebound since mid-May lows. The Hang Seng Tech Index seems to have bottomed on the 14th May 2021 at 7,565 points and is currently up around 10% at 8,305 points as of 1st June 2021.
Also, watch my video reviewing the Lion-OCBC Securities Hang Seng Tech ETF:
Inflation fears seems to be receding at least for now, with U.S. 10-year Treasury bond yields somewhat stabilizing around 1.6%. If inflation is indeed transitory as the Federal Reserve postulates and doesn’t push the Fed to raise interest rates, that’s good news for high growth tech stocks to continue powering higher.
With Chinese tech stocks rebounding off recent lows, are Chinese tech stocks attractively valued and is it a good time to buy the Hang Seng Tech ETF?
Chinese tech stocks have taken a beating due to increased scrutiny from Chinese authorities, starting with the cancellation of Ant Group’s $37 billion IPO just a few days before it’s scheduled debut on 5th November 2020. Following that, Alibaba was hit with a $2.6 billion fine as a result of an anti-monopoly probe. Since then, fears of greater regulation have spread to other Chinese big tech stocks. That said, regulatory risks are likely to be priced in.
On the bright side, Chinese tech companies like Tencent, Meituan, Xiaomi, Pinduoduo, and Kuaishou reporting impressive earnings over the past few weeks. JPMorgan and S&P Market Intelligence think that Chinese tech stocks are attractive despite regulatory risks.
I believe Chinese tech stocks are attractive at these levels. One way to get exposure to Chinese tech stocks is through the Hang Seng Tech ETF (SGX:HST and HKEX:3067). Instead of having to spend hours on researching the best Chinese tech stocks, this ETF will allow you to gain exposure to a diverse package of 30 Hong Kong-listed Chinese tech companies in one investment.
For Singapore-based investors, you can also set up automatic monthly investments into HST through the OCBC Blue Chip Investment Plan (BCIP).
Index Update
For a quick introduction to the Lion-OCBC Hang Seng Tech ETF (SGX:HST), refer to this post. I’ve also compiled a simple guide to the Hang Seng Tech ETF on this page.
Some important updates to the Hang Seng Tech Index to highlight since my last update on 12th March.
Baidu (HKEX:9888), Haier Smarthome (HKEX:6690) and GDS (HKEX:9698) were added and 4 stocks were removed.
No change in the top 10 constituents except for their rankings. Each constituent stock is market cap weighted and capped at 8% weight, so the index holding in Alibaba might have to be reduced.
What I’ve Been Doing
I’ve recently signed up for a Tiger Brokers (to get my discounted Tesla share), so I’m planning to dollar-cost-average (DCA) manually every month into SGX-listed HST. Tiger Brokers offers very competitive commission fees, no kidding.
I just made my first purchase of HST on the platform last month (got a good price) and the commission was only $0.62! Not sure what’s the commission and fee structure but that’s really cheap in my view. In comparison, I was paying $5 per month on the OCBC BCIP but the advantage was that it’s automatic.
If you want to open a Tiger Brokers account, you can use my referral link. You will get the welcome gifts below, subject to terms & conditions. I will also receive some referral rewards for full disclosure. Once you sign up, you can also refer your friends to get referral rewards too.
Hope this post was useful if you’re considering gaining exposure to Chinese tech stocks. Subscribe to my blog if you would like to get more of these type of updates.
Disclosure: I’m long HST, Alibaba and Tencent.
Disclaimer: This is not financial advice. I am not professional financial advisor nor do I work in the finance industry. Anything I write here is purely my personal opinion. Please do your own research and due diligence before investing into anything. All investments come with associated risks. Best to consult a financial advisor if you’re still unsure.