China’s recent stock market crash has sent many stocks to the floor. It might be a good opportunity to invest after the burst of the giant stock market bubble. As billionaire investor Warren Buffett once said, “Be fearful when others are greedy, and greedy when others are fearful.”
Here is how you can benefit from China’s stock market crash.
Global X China Consumer ETF (NYSEArca/CHIQ)
The Global X China Consumer ETF (NYSEArca/CHIQ) was founded in 2009. The exchange traded fund (ETF) seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Solactive China Consumer Total Return Index.
The ETF currently has 40 securities among its holdings. Its top three holdings are China Resources Enterprise Ltd., Alibaba Group Holding Limited, and Want Want China Holdings Ltd.
There has been a shift in China’s growth strategy from exports to domestic consumption. For many years, China had been the manufacturer of the world, shipping all kinds of products to foreign customers. This time around, the world economy has slowed down, and the country’s domestic demand is becoming the main driver of economic growth.
For those that are worried whether China’s stock market downturn would deteriorate household wealth, here is a fact: stocks represent less than 15% of household financial assets. (Source: Business Insider, July 7, 2015.) The small fraction of equities in household financial assets suggest that the impact of the recent stock market crash on household spending power will not be substantial.
Guggenheim China Technology ETF (NYSEArca/CQQQ)
The fund was founded in 2009, and seeks investment results that correspond generally to the performance, before fees and expenses, of the AlphaShares China Technology Index.
Guggenheim China Technology ETF (NYSEArca/CQQQ) currently holds 75 securities. Its top three holdings are Tencent Holdings Limited, Baidu, Inc., and Alibaba Group Holding Limited.
China’s technology industry has been hit hard in the crash. ChiNext, a NASDAQ-style board of the Shenzhen Stock Exchange that focuses on innovative, fast-growing technology companies, has been the most volatile part of China’s stock market. The ChiNext Index plunged a staggering 38.8% since its peak on June 3, 2015.
The ETF was hit hard, too. Since its peak on May 19th, the fund has fallen 21.8%. But growth in China’s technology sector has remained strong during the period. With more people getting access to mobile INTERNET and the country’s urbanization process, the technology sector’s consumer base is going to grow even further. Investors that want to be part of the tech boom should take a look at the ETF.
Great opportunities come with risk. Despite the recent plunge seen as an oversold market, significant risk remains in the Chinese stock market. The Shanghai Composite Index is still 81.9% higher compared to last July, while the Shenzhen Composite is up 77.4%. The increase in value of Chinese stocks, even after the recent downfall, is still high compared to growth of its real economy.
Another problem is whether this is the end of the crash. After a huge amount of stimulus efforts, markets finally went up yesterday. But restoring sentiment can be difficult, and whether investors are willing to part their money with Chinese stocks remains uncertain.