Billionaire investor David Tepper, founder of Appaloosa Management, has voiced his optimism about the investment opportunities present in China. For those seeking exposure to the Chinese market, ETFs serve as a reliable method, offering diversification and flexibility.
Notable options for investing through ETFs include the iShares MSCI China ETF (MCHI), the iShares Large Cap China ETF (FXI), and the KraneShares China CSI Internet ETF (KWEB).
The allure of these Chinese ETFs lies in the combination of attractive valuations, promising growth prospects, Tepper’s resounding endorsement, and China’s recent economic stimulus efforts. However, a more detailed examination is warranted to identify the optimal ETF for investors aiming to capitalize on the Chinese market.
Understanding Tepper’s Enthusiasm Toward China
David Tepper has previously displayed a positive outlook on China and recently reinforced his position by increasing his stakes in prominent Chinese companies such as Alibaba, Baidu, and PDD Holdings. In an interview, Tepper emphasized his comprehensive endorsement of Chinese investments, affirming his interest in “everything” related to China.
Tepper’s enthusiasm follows China’s economic stimulus measures announcement. He highlighted the attractiveness of stocks with low single-digit P/E ratios combined with double-digit earnings growth rates, an appealing formula for lucrative investments compared to the elevated valuations in the S&P 500.
With major Chinese stocks like Alibaba, PDD, and Baidu trading at remarkably low P/E multiples and anticipated earnings growth, Tepper’s confidence in the Chinese market seems well-founded.
An array of ETFs provide avenues for investors to access these undervalued Chinese equities. A deep dive into some primary China-focused ETFs commences with an examination of FLCH.
Evaluating the Franklin FTSE China ETF (FLCH)
As per Franklin Templeton, the overseeing entity of FLCH, the ETF offers exposure to the Chinese stock market, granting investors an efficient and cost-effective method to tap into China’s economic landscape. FLCH predominantly invests in large-cap and mid-cap Chinese equities.
FLCH stands out for its robust diversification, holding 952 stocks with the top 10 holdings representing 44.9% of the fund. This diversification encompasses various sectors, providing a comprehensive snapshot of the Chinese economy.
Among FLCH’s leading holdings are prominent Chinese internet and e-commerce firms like Tencent, Alibaba, and PDD Holdings. Unlike other China ETFs, FLCH provides exposure across various sectors including automotive manufacturing, construction, and banking, offering a holistic view of the Chinese market.
FLCH features impressive Smart Scores for its holdings, with the majority boasting Outperform-equivalent ratings. The ETF itself garners a favorable ETF Smart Score of eight, indicating an Outperform rating. Moreover, FLCH’s low expense ratio of 0.19% sets it apart as the most cost-effective option among major China-focused ETFs.
With a dividend yield of approximately 2.4%, FLCH combines affordability with potential returns, making it an enticing choice for investors.
Analyst Viewpoint on FLCH Stock
The current Wall Street sentiment towards the FLCH ETF reflects a Moderate Buy consensus, comprising 161 Buy ratings, 778 Hold ratings, and 11 Sell ratings over the past three months. The average FLCH stock price target of $21.76 indicates a prospective 7% upside from its present value.
