China Market ETF

Invest in Electric Vehicles and the Future of Mobility Through this ETF

Calvin Lo

The NikkoAM-StraitsTrading MSCI China Electric Vehicles And Future Mobility ETF will be listed on SGX on 20th Jan 2022, under tickers EVS (currency SGD) and EVD (currency USD). The ETF is now available for subscription during the initial offer period 3-14 Jan 2022.

Go to NikkoAM website here to find out more info and how to invest.

You can also find the latest factsheet (as of 31 Dec 2021) for the underlying index, MSCI China All Shares IMI Future Mobility Top 50 Index fact sheet here. Screenshot below for quick reference.

Source: MSCI

I’ll keep this post brief and won’t be going through the details. Seedly did a pretty comprehensive one here. In this post, I’ll just be sharing my thoughts on this ETF.

What I like

  • Exposure to secular growth EV sector which is also heavily supported by the Chinese government policy, eager to address the pollution problem in China. Having the Chinese government on your side is definitely a huge tailwind for the sector.
  • Besides EV makers like NIO, Geely, BYD, Xpeng, the ETF also offers exposure to upstream industries like battery makers CATL (also a Tesla battery supplier) and Lithium miners/producers Jiangxi Ganfeng, Yunnan Energy. An investment in this ETF is akin to investing in the entire Chinese EV supply chain. The great thing is that China is pretty much self-reliant when it comes to EVs, and has been pretty aggressive in securing lithium production overseas.
  • Exposure to the broader future mobility sector, which includes autonomous vehicles (AV), ride-hailing, energy storage, and intelligent transportation systems. EVs are only one part of the broader advancement in the mobility segment. As technology advances and new companies rise taking advantage of adjacent trends, this ETF will also benefit.
Source: NikkoAM

What I don’t

  • No Tesla, currently the biggest fish in EVs. Tesla, although not a Chinese EV maker, has 2 best-selling EVs in China – Model 3 and Model Y. According to InsideEVs.com (read here) from Jan-Nov 2021, Tesla was only behind SAIC’s Wuling Hong Guang MINI EV in sales in China. Excluding Tesla means that you would be betting that Tesla doesn’t dominate China EV sales and that one of the Chinese EV makers will overtake Tesla. That certainly is possible, especially if China goes protectionist as they are prone to in strategic sectors.
Source: InsideEVs
  • As with any pure exposure to China, investors are subject to the whim and fancy of the Chinese government in power. In China, policy is dictated unilaterally by the party in power namely the Chinese Communist Party. There is no debate, no opposition, no recourse. Although EVs are now viewed favourably by the CCP, it is not a guarantee that policy will not change overnight although remote. The Chinese stock market is also a different beast, especially if you’re used to just investing in the US or Singapore.

Alternatives

If you’re looking for broader global exposure to the EV sector, you can consider these ETFs:

  • Global X Lithium & Battery Technology ETF (LIT) – Mostly lithium and battery producers, but also includes Tesla and BYD.
  • Global X Autonomous & Electric Vehicles ETF (DRIV) – Besides global EV makers, also includes semiconductors (Nvidia, Intel) and software companies (Apple, Microsoft, Alphabet).
  • KraneShares Electric Vehicles & Future Mobility ETF (KARS) – Similar in name but vastly different holdings, including legacy auto (Ford, GM, Daimler, BMW), semiconductors and battery makers.

Final thoughts

If you’re bullish on China and have a very long-term view, this ETF might be worth considering since there’s little doubt left that EVs are the future of mobility. Besides new EV makers popping up, even legacy automakers are jumping on the bandwagon, afraid to be left behind.

China is now also very attractively priced, after valuations have declined dramatically since early 2020. China EV makers are trading at much lower valuations than their American peers, e.g. Tesla, Rivian, Lucid.

However, if you choose to invest don’t expect prices to surge like before during the EV hype. That bubble has burst quite some time back, and we might still be in decline for a while. That said, buying now is definitely much safer than buying at the peak (duh!).

Personally, this ETF doesn’t excite me enough at the moment but I will keep this on watch for when it starts trading on SGX. IOP is now open until 14th Jan, but even if you’re interested to buy, I don’t think you need to rush into a decision. Take your time to consider carefully, and even if you pull the trigger, maybe gradually ease into a position. Remember to play the long game.

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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