Trackinsight: Hang Seng Index drops to 6-year low

Hang Seng Index was dragged down by Chinese listed stocks and reached its lowest point since 2016.

The Hang Seng Index sank 5% on Monday, March 14th to reach its lowest level since 2016. Hong Kong's flagship index was mainly dragged down by Chinese listed stocks, amid worries over China-Russia relations, fears of further regulatory crackdown, and the resurgence of the coronavirus in some Chinese provinces. Among notable sliders of the index were Meituan (-16.84%), JD.com (-14.77%), Alibaba (-10.9%), Tencent Holdings (-9.79%), Xiaomi (-8.64%), and NetEase (-8.14). The Hang Seng China Enterprises Index closed down 7.2%, the biggest drop since November 2008 and the Hang Sang Tech Index sank 11%, its worst decline on record.

American Investors: How to invest in Hong Kong ETFs

American investors looking to buy the dip can explore iShares MSCI Hong Kong ETF (EWH), Franklin FTSE Hong Kong ETF (FLHK), and KraneShares Hang Seng TECH Index ETF (KTEC). EWH is the largest in size, with $811 million in assets under management. The fund seeks to track the MSCI Hong Kong 25/50 Index and invests in large and mid-sized companies in Hong Kong. As for the industry breakdown, insurance has the highest allocation (22%), followed by real estate (21.94%), capital goods (12.98%), diversified financials (12.3%), utilities (11.69%), and banks (6.35%). EWH has a total expense ratio of 0.50% and trades primarily on the NYSE Arca.

This year, EWH witnessed outflows of $66 million and its NAV per share drop by 7%.

European Investors: How to invest in Hong Kong ETFs

European investors have also access to Hong Kong ETFs via the HSBC Hang Seng TECH UCITS ETF (HSTE), the Lyxor Hong Kong (HSI) UCITS ETF (LYXHSI), and UBS ETF – MSCI Hong Kong UCITS ETF (HKDU). The ETF range received $43 million of net inflows despite the gruesome performance.

The largest is HSBC's HSTE ETF with EUR 173 million in assets under management. The fund seeks to track the Hang Seng TECH Index, which is comprised of the 30 largest technology companies listed in Hong Kong such as Alibaba, Tencent, and Xiaomi, to name a few. HSTE has a total expense ratio of 0.5% and trades primarily on the London Stock Exchange (HSTE LN, USD or HTSC LN (GBP). This year, the fund's NAV per share dropped by 35%.

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