Investors Urged to Focus on China for AI Exposure, says Matthews Asia’s Mattock
- Andrew Mattock of Matthews Asia emphasizes the need for targeted investments in China for AI exposure.
- He highlights limitations of broad emerging market strategies, noting the heavy weighting in South Korea and Taiwan.
- Billionaire David Tepper has also shown renewed interest in Chinese investments amidst market fluctuations.
Investors aiming to increase their exposure to artificial intelligence (AI) should specifically target China, according to Andrew Mattock, a portfolio manager at Matthews Asia. In remarks made during an interview on CNBC’s “ETF Edge,” Mattock emphasized that a more strategic, deliberate approach is essential because generic emerging market investment strategies may not yield significant results.
“Investors need to be aware when they buy an emerging market fund or when they buy a plain vanilla MSCI product… they’re not getting a lot of it,” he stated, noting the absence of key Chinese assets in broader strategies. He pointed out that companies from South Korea and Taiwan make up nearly half of the iShares MSCI Emerging Markets ETF (EEM), while the iShares MSCI China ETF (MCHI) does not sufficiently focus on AI stocks.
As the manager of the Matthews China Fund (MCHFX), which allocates at least 80% of its net assets into stocks of companies operating in China, Mattock mentioned that the fund has seen a 4% dip so far this year, with major holdings in companies like Tencent and Alibaba.
Noteworthy Changes in Chinese Investment Landscape
The landscape for investing in China appears to be undergoing a significant transition. Billionaire hedge fund manager David Tepper, the founder of Appaloosa Management, recently expressed renewed confidence in China’s economy. In a September 2024 statement to CNBC, he revealed that he had purchased more assets related to China, indicating a shift in his investment strategy.
In light of the volatility in the Chinese market, KraneShares’ Brendan Ahern advised investors to incorporate protective strategies around certain ETFs, highlighting the use of options for risk management. He stated, “I like the idea of utilizing options around some of those ETFs… like with KWEB [KraneShares CSI China Internet ETF],” emphasizing that hedge funds often prefer these ETFs for their capacity to write calls, thus mitigating downside risk.
FactSet data indicates that the KraneShares CSI China Internet ETF shares the same top two holdings—Tencent and Alibaba—as the Matthews China Fund. However, the ETF has experienced a decline of over 27% so far this year.
News Courtesy of CNBC
