Inside The Bedokian’s Portfolio: iShares FTSE China A50 ETF

Inside The Bedokian’s Portfolio is an intermittent series where I will reveal what we have in our investment portfolio, one company/bond/REIT/ETF at a time. In each post I will briefly give an overview of the counter, why I had selected it and what possibly lies ahead in its future.

For this issue, I will discuss about the Hong Kong listed iShares FTSE China A50 ETF (2823.HK).

 

Overview

 

Incepted 0n 15 Nov 2004, 2823.HK tracks the FTSE China A50 index, which consisted of A-class shares (A-Shares) from 50 of mainland China’s largest companies traded on both the Shanghai and Shenzhen Stock Exchanges. The underlying assets are denominated in Chinese Yuan (CNY) and listed under two currencies in the Hong Kong Stock Exchange, CNY and Hong Kong dollars (HKD). The ETF has around 13 billion CNY under management with a fee of 0.35%, and the dividends are distributed annually (usually paid out in December).

 

Why 2823.HK?

 

Back on 3 Oct 2022 I had mentioned about holding this ETF. As stated in that post, I had selected 2823.HK due to two reasons: the A-Share holdings and the diverse sectors it presented. 

 

If you had ventured into the Chinese stock market, there are a few classifications of equities, like the commonly known A-Shares (shares issued in China of Chinese companies listed in the Shanghai or Shenzhen Stock Exchanges) and H-Shares (shares of Chinese companies listed on the Hong Kong Stock Exchange), on top of others. Though technically these two classes of shares are similar, there were instances where price divergences happened between the two, even if both share types were from the same company. This characteristic could be attributed to the availability of share types to different groups of investors; H-Shares are available to foreign participants easily while A-Shares are for mainland Chinese investors/traders and a regulated small group of foreign institutional investors. For investing in a country, our style is to own the securities as direct as possible where available to capture the local investing environment, hence we went for an A-Share ETF.

 

For the reason of diversification of sectors, this is obvious as it plays to our investment playbook. 2823.HK contains a vast spectrum of companies in different sectors such as the distillery Kweichow Moutai (consumer staples), Bank of China (financials), Foxconn Industrial (information technology), etc., thus representing the microcosm of the Chinese economy.

 

For our strategy, 2823.HK is a growth and dividend play in the portfolio.

 

What’s Next?

 

Chinese equities market and economy had gone through a rough patch due to a myriad of reasons including its overleveraged property sector and weakened consumer demand. The authorities had announced further stimulus measures to bring up the economy, so there is some economic positivity over the horizon.

 

The current price is HKD 11.74 (as of 9 Feb 2024). This presented a good opportunity for us to average down based on our previous entry prices (see under Disclosure below) so we may add more in the coming weeks. 2823.HK currently represented less than 1% of our Bedokian Portfolio holdings.

 

Disclosure

 

Bought 2823.HK at:

 

HKD 19.29 at Jul 2021

HKD 18.17 at Jan 2022

HKD 14.20 at Oct 2022

 

Disclaimer