China Market ETF

Hang Seng Tech ETF (SGX:HST) Update – June 2022

Calvin Lo

Chinese stocks finally seem to be turning the corner and starting to turn bullish, especially for Chinese tech stocks. The Hang Seng Tech Index or HSTECH rose 8.6% MoM in June, and seems to be showing early signs of an uptrend. Other China-focused indexes all showed similar positive returns in June. Alibaba was the top contributor constituent to HSTECH, and Li Auto was the top performing constituent.

You can check out the monthly roundups issued by Hang Seng Indexes here. You can also subscribe to their regular updates on their website to receive updates in your inbox.

If you want to gain exposure to HSTECH, you can do so through the Lion-OCBC Securities Hang Seng Tech ETF (SGX:HST/HSS) – read my review here. You can also find HST Q1 2022 Newsletter here.

If you prefer broader exposure to Chinese stocks, you can also consider the Lion-OCBC Securities China Leaders ETF (SGX:YYY/YYR) – read my review here.

Chart

From a technical perspective, the HST has broken out of the upper bound of its long term downtrend since early June 2022. HST has recently bounced off against the S$0.887 resistance (previous support).

Reasons to be bullish

There are several reasons to be cautiously bullish on Chinese stocks:

  • Chinese central bank PBOC embarking on monetary easing path, diverging from most other central banks especially the US Fed and Europe ECB. This will likely be supportive to Chinese companies and stocks.
  • So far no further news of debt default contagion in Chinese real estate market due to Evergrande’s default.
  • Easing of COVID-19 movement restrictions, although the Chinese government could reimpose lockdowns if another wave of infections hit.
  • Specifically for Chinese tech stocks, the tech crackdown by Chinese regulators appears to be trailing off.

Changes in constituents

Since my last update here, Nio (EV manufacturer) has been added at the expense of ASM Pacific Technology (semiconductor manufacturer. Nio recently also listed in Singapore on SGX as ticker NIO, see listing info here. Nio is also listed on NYSE and HKEX. Other Chinese EV makers Li Auto and Xpeng were also added back in March 2022. So with Nio’s addition and existing constituent BYD, there are now 4 EV makers on HSTECH.

Snapshot of HSTECH constituents as of May 2022 for reference (not updated for June yet),

What I’m doing

I’ve started buying HST again, with the most recent purchase on 28 June 2022. Hopefully the positive momentum in Chinese tech stocks continues. My cost basis in Tiger Trade is still pretty high at S$1.094. I have a few other shares with OCBC at even higher cost basis around S$1.35.

As you can see I bought a bunch of shares around a year back when I underestimated how bad the tech crackdown would be. When more news broke back then, I decided to stop buying altogether until we get a better idea of when the regulatory storm would end.

I plan to continue to DCA into HST over the next few months, unless Chinese tech stocks start to run away and surge into overvalued territory which I think is unlikely though I won’t complain if it happens.

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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.

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