China’s latest economic data has blindsided investors. Let’s take a look at what it means for China stocks…
The post BetaShares ASIA (ASX:ASIA) ETF slumps amid China slowdown appeared first on The Motley Fool Australia. –
The BetaShares ASIA Technology Tigers ETF (ASX: ASIA) has been on the decline since around February this year. The exchange-traded fund (ETF) has been caught in the China regulatory whirlwind, with 45.5% of the fund’s holdings exposed to the country.
The ETF has continued to fall this week as reports arise that China’s economy has slowed faster than expectations. Potentially more concerning for the outlook of companies with exposure to the country is the possibility of the condition worsening.
China stocks getting hit from all sides
Economic data for the month of July suggests China is suffering a slowdown. The National Bureau of Statistics of China reported modest retail growth compared to estimates.
For example, retail sales increased by 8.5% year-over-year in July — while expectations were for 11.5%. Similarly, online sales of consumer goods climbed 4.4% — a significant shortfall to the 21% average for the previous five years.
According to the release, the Bureau cited “the impact of multiple factors including the growing external uncertainties and the domestic COVID-19 epidemic and flooding situation” for weighing on China’s economic stability.
The consumer side of the economy wasn’t alone. China’s manufacturing and industrial production also suffered a faster slowdown than previously anticipated.
Indeed, the abrupt weakening in the growth of the Chinese economy appears to have caught investors and analysts off guard. Giant Chinese companies such as Tencent Holdings Ltd (HKG: 0700) and Alibaba Group Holding Ltd (NYSE: BABA) tumbled on the economic news.
Could the ASIA ETF be appealing now?
Some investors like to take a contrarian approach to their investment selections. Such an approach means putting to work the saying, “Buy when there’s blood in the streets.” Well, one could argue that is certainly the case for the BetaShares ASIA ETF, considering it has shaved off 16.4% since the beginning of the year.
As my Foolish colleague Tristan covered, BetaShares chief economist David Bassanese considers there to be a mismatch between Chinese business sentiment and earnings. While investors are wary of the regulatory risk, Bassanese points out these companies are growing earnings.
Lastly, Bassanese noted that Asian tech companies have often traded at discounts compared to their US-listed peers. However, that discount has gone from a historical average of 15% to roughly a 30% discount in late July. As a result, the economist suggested there might be a buying opportunity for long-term investors for shares such as the ASIA ETF.
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Alibaba Group Holding Ltd. The Motley Fool Australia owns shares of and has recommended BetaShares Asia Technology Tigers ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.