Internet platforms used to be the dominating forces in driving China’s tech cycle in the last decade, but their high-growth phases in e-commerce, gaming, ride-hailing and last-mile delivery are slowing substantially as indicated by the latest result announcement and management guidance. Changes in government policy, antitrust concerns, breach of data security and maturing markets are all pointing to a less promising outlook of their business models. On the contrary, hardcore technology, particularly the semiconductor, is the rising star in the market despite the increasing hostile actions taken by the Biden administration. This article would explain why semiconductor will be one of the key focuses of China’s stock market in the foreseeable future and how Premia China STAR50 ETF is the right tool to capture the industry opportunities as investors reposition for the paradigm shift in the technology space in China.

China market has taken a pause after a strong rally in the past few months. The renewed hawkish tone from the US Fed may be the main reason behind the consolidation. Some critics are suggesting that the China reopening trade is done, or has become overcrowded already with not much immediate upside as a tactical trade. In this article, our Partner & Co-CIO David Lai addresses this topic from various aspects ranging from macro economies, investors’ positioning, to policy agenda and market valuation. He would also share why we believe it’s onshore A-shares that are picking up the baton for the second act of the rally - as the China reopening play evolves from short term tactical, to fundamental strategic opportunities driven by positive earnings growth and restoration of business and consumer confidence.

If we agree China may offer outperformance in 2023, then the next step is to figure out the right positioning to capture the alphas. Investors are now at a crossroad to decide whether China tech is still investible. On one hand, the Internet platforms, used to be the market leaders, may no longer be the high-growth candidates in future as shown by the recent sluggish financial results. On the other hand, technological advancement remains one of the government’s key agendas that should help support the sector. In this article, we would like to share how to identify the “right” tech exposure to capture the opportunities in China market.