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London-listed investment vehicles have less exposure than you might think
Thursday 05 Aug 2021 Author: Steven Frazer

Chinese authorities continue to bear their regulatory teeth with Tencent the latest stock to slump on chatter about Beijing seeking to wield its power. The social media and gaming technology giant saw its stock plunge as much as 10% at one point on 2 August. 

Tencent is under fire over how it collects and keeps data on customers and for not stopping children who play its games for long periods of time. Its share price has fallen nearly 20% over the past month.

Many investors use Asia-focused investment trusts to access Chinese companies, yet research from Numis Securities shows that these collective investment vehicles are not as exposed to China’s big tech firms as many might think.

Popular trust such as Scottish Mortgage (SMT), Fidelity China Special Situations (FCSS) and Baillie Gifford China Growth (BGCG) own sizeable stakes in Tencent and Alibaba, two of the tech giants to come under scrutiny, yet tech stocks only represent approximately 20% of their respective portfolios.

This compares to more than 30% tech exposure in the sector split of the MSCI China index, based on the Numis data.

However, many of China’s biggest tech names, including Alibaba, Meituan and are classified by MSCI as consumer discretionary stocks, while the likes of Tencent and Baidu, for example, are classed as communication services companies.

The MSCI’s information technology sector is worth just 6.55% of the overall mix, and not one stock from that sector is among the largest 10 contributors to its China index.

DISCLAIMER: The author owns shares in Scottish Mortgage

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