"Investment in new energy vehicles is very hot now, but it seems that there are no new car-making forces in the A-share ETFs." Which ETF can cover these new forces? Recently a reader asked an interesting question.
Indeed, when talking about this wave of new energy vehicle craze, we cannot ignore the new car-making forces such as Nio, , Xpeng, , and Ideal. It is believed that it represents the disruptive power of domestic automobiles, and the increase of more than 50 times in one year can be called a "myth".
Which ETF can better cover the new car-making forces? After some searching, I found a niche index: CSI Hong Kong Stock Connect Technology Index (HKC Technology) .
Different technology index
Yes, you read it correctly, and I wrote it correctly. If you want to buy a new car-making force, you have to pass the HKC Technology Index (931573).
When talking about "technology index", it is estimated that the first thing many Christians think of is the Hang Seng Technology Index, which was very popular last year, and of course its close relative, the Hang Seng Internet Index - in the past year or so, Chinese Internet stocks have halved. In the halved market, many people used these two indexes to buy bottom positions in and add positions in .
However, as a professional citizen, you should remember: technology ≠Internet. The Hang Seng Technology Index and other technology indexes such as the HKC Index are also very different from .
How unique is the HKC Technology Index launched by China Securities Index Company ? Here is a picture of the top ten heavyweight stocks as of June 30, 2022, and you should have an intuitive feeling.
Yes, the largest heavyweight stock in the HKC Technology Index is not Tencent as many people take it for granted, but WuXi Biologics in the medical industry. At the same time, there are three new energy car companies that have entered the top ten heavyweight stocks: BYD , Ideal, Xiaopeng.
Yes, in the compilation plan of China Securities Index companies, technology includes the following fields:
Securities of listed companies in communications, Internet, medical equipment, biotechnology, electronics, semiconductors, new energy and other industries as a technology theme space
Therefore, according to traditional industry classification, information technology is only the third largest industry, with consumer discretionary and pharmaceutical biology ranking first and second.
If you are familiar with CSI's technology index, you should know that the compilation of this technology index is what CSI has always done. For example, the A-share technology leading index has a similar direction.
Comparing the heavyweight stocks of CSI HKC Technology and Hang Seng Technology, we can still see the huge difference between the two.
The following table is the list of heavyweight stocks published by Hang Seng Index Company as of the end of May. It can be seen that it still focuses on traditional technology and Internet stocks. The top seven of the top ten heavyweight stocks are all in the information industry, and it is not until the eighth that there is a third Sunny Optical, a non-technical Internet stock.
HKC Technology "Inclusive" Alpha
Obviously, HKC Technology is more inclusive of the industry than Hang Seng Technology - compared to Hang Seng Internet, it is naturally stronger.
Why is inclusivity important?
To a large extent, when a portfolio contains multiple industries, the weak correlation between these industries can provide you with a more robust portfolio.
Here, let us compare the two major investment directions of Hong Kong stocks that Christians are familiar with: Hong Kong Internet stocks represented by the Hang Seng Internet Index, and Hong Kong health stocks represented by the Hang Seng Healthcare Index.
The following table is a comparison of the income of the two indexes from 2019 to June 30, 2022. It can be clearly seen that the performance of the two indexes is still different. Medical care was stronger in 2019, and then the Internet caught up. By the beginning of 2021, there is almost no difference in performance between the two. Then the Internet began to plummet first, while medical care reached a new high in July of that year, and then began to plummet. By the adjustment in April 2022, the two performed similarly, both returning to a new high. It has given up all its gains since 2019 and has further retreated.
The following table shows the correlation coefficient of the two weekly increases during this period. 0.75 is not a strong correlation for the two stock indexes.
As long as you have studied investment portfolios, you should understand that an index that only contains these two industries will present a better risk level than these two.
What's more, the HKC Technology Index, in addition to Internet technology and healthcare, also includes new energy vehicles and chips. The addition of these sub-sectors further strengthens its dispersion effect.
The chart below compares the returns of the Hang Seng Technology and HKC Technology indexes with the above two indexes so far in 2019. It can be seen that the two technologies rely on a broader connotation, and their performance is stronger than that of Hang Seng Internet and Hang Seng Healthcare. of. Of course, among the two technologies, HKC Technology has a crushing advantage.
The following table shows the year-by-year returns of the four indices (data as of June 30 in 2022). It can be seen that HKC Technology has the largest increase in the bull market in 2020, and the least decline in the correction in 2021. This wave of half a year is still slightly better than Hang Seng Healthcare.
If we further compare some risk measures of the four indexes so far in 2019, we can see that the volatility of HKC Technology is the second lowest, second only to Hang Seng Healthcare, and its largest drawdown is among the four indexes. Minimal .
If medical care becomes stronger in the future
Although I found HKC Technology because of the new car-making force, in fact, what really makes me look at it differently at this moment is the proportion of its health industry. Regular readers of
EarlETF should note that I have actually been paying attention to the bottoming out of traditional core assets such as "drinking alcohol and taking medicine" for a long time - after concepts such as the Internet and new energy have experienced surges, the adjustment time is not short and the magnitude is not large. These core assets, especially big pharmaceuticals, also have the possibility of rotation.
Perhaps, this is no longer a possibility, but a current situation that is happening.
The following table shows the monthly performance of several indices in the first six months of 2022. It can be seen that Hang Seng Healthcare has already outperformed the Hang Seng Internet sector in June.
For professional investors, they may place heavy bets on Hong Kong stock medical funds, but the author does not recommend this to ordinary Christians, especially those who hold them for a long time.
For ordinary citizens, the biggest problem with bets that are too subdivided into industries is inevitably portfolio fluctuations and excessive retracements - look at the 14.51% monthly decline of Hang Seng Healthcare in January this year. This is clear at a glance.
For this reason, for ordinary Christians, based on long-term holdings, I feel that "heavy positioning" of is not as good as "configuration" of . A comprehensive portfolio like HKC that includes the Internet, medical care, new energy, etc. is better and has smaller fluctuations. A smaller retracement will lead to a better holding experience.
HKC Technology is not a new index, it was released back in 2014. However, fund companies began to issue ETFs one after another in the middle of last year. As of June 30, the largest one was the Invesco Great Wall CSI Hong Kong Stock Connect Technology ETF (513980), with shares exceeding 2 billion and the market scale exceeding 12 100 million, because it is a Hong Kong Stock Connect ETF and supports T+0 trading. The transactions are very active and it is a good trading variety.
