Investors seeking to enhance their exposure to artificial intelligence should consider focusing on China, according to Andrew Mattock, a portfolio manager at Matthews Asia. He advised that a more targeted investment strategy is necessary, as conventional emerging market funds may not adequately capture the potential of AI within the region. "When purchasing an emerging market fund or a standard MSCI product, investors may overlook significant opportunities," Mattock explained in a recent interview with CNBC’s "ETF Edge."
He emphasized that the MSCI Emerging Markets ETF (EEM) features a substantial portion of companies from South Korea and Taiwan, while the iShares MSCI China ETF (MCHI) does not concentrate on AI stocks. Mattock manages the Matthews China Fund (MCHFX), which allocates at least 80% of its net assets to companies in China; the fund has declined by 4% this year and counts Tencent and Alibaba among its largest holdings.
The investment landscape in China appears to be shifting. David Tepper, a billionaire hedge fund manager and founder of Appaloosa Management, has expressed renewed interest in Chinese investments, stating he has expanded his portfolio in "everything" related to the country. Meanwhile, Brendan Ahern from KraneShares has suggested that investors employ protective strategies, such as using options with certain ETFs, like the KraneShares CSI China Internet ETF (KWEB), to shield against market volatility.
The KWEB ETF, which shares its top two holdings with the Matthews China Fund, has experienced a sharp decline of over 27% this year.
Why this story matters: Investors may miss out on AI growth opportunities in China if they rely on general emerging market funds.
Key takeaway: A focused investment approach is essential for capturing the potential of China’s AI sector.
Opposing viewpoint: Some experts advocate for using protective strategies, such as options, to mitigate risks associated with investing in China.
