BlackRock’s latest addition to its lineup of ETFs aims to capture a swath of China’s technology firms across multiple sectors.
The iShares MSCI China Multisector Tech ETF (TCHI) debuted on the Nasdaq Thursday with an expense ratio of 0.59%.
TCHI tracks an MSCI index that selects mid and large capitalization companies in technology-related subindustries in the communication services, consumer discretionary, financials, health care and information technology sectors. The index rebalances quarterly based on free float market capitalization available for non-Chinese investors to acquire, with a 4% limit on any one stock or group of stocks that are subsidiaries of a holding company.
The top holdings in TCHI’s index as of Dec. 31 last year include optics device maker Sunny Optical as the largest holding, with 5%, along with battery maker Contemporary Amp at a 3.73% weight. The rest of the top 10 include internet industry names like Baidu, Tencent, JD.com and Alibaba.
Chinese internet names suffered deep sell-offs last June after Beijing started a wave of crackdowns on the industry, particularly after ride-hailing app DiDi Chuxing listed on the New York Stock Exchange, where it would have been required to disclose more information than the Chinese government would be comfortable with. Firms like Alibaba, Tencent and Meituan were also hit with antitrust fines and investigations.
Existing ETFs covering the Chinese tech space haven’t been spared. The Invesco China Technology ETF (CQQQ) and the KraneShares CSI China Internet ETF (KWEB) have posted losses of nearly 40% and 59% in the past 12 months.
Those losses are steeper than the benchmark iShares MSCI China Index (MCHI) and the Global X MSCI China Information Technology ETF (CHIK), which despite the name doesn’t hold the big internet names that dragged down CQQQ and KWEB.
But investors betting that China is on the tail end of cracking down on its tech sector don’t mind the losses, with CQQQ gaining $572.88 million and KWEB increasing by a massive $8.3 billion in the past year.
BlackRock itself is among the bulls. The firm’s research unit encouraged investors last August to allocate more of their assets into China, and called for it to be promoted from an emerging market into a developed one.
CEO Larry Fink also mentioned the opportunities in China in his most recent chairman’s letter, noting that just 3% of the Chinese equity and bond markets are owned by foreign investors.
“Many of our global clients are looking to BlackRock to help them invest in this market for the return opportunities and portfolio diversification that Chinese assets offer,” he wrote.