TIGER China Electric Vehicle SOLACTIVE
Year-to-Date Return at -32.3%
Chinese Authorities Continue Lockdowns in Some Cities
Delays in Electric Vehicle Sales and Production
[Asia Economy Reporter Minji Lee] Chinese electric vehicle ETFs continue to trend downward, unable to find an escape from the government's lockdown policies.
According to the Korea Exchange on the 25th, looking at the returns up to the 22nd of this year, the ‘TIGER China Electric Vehicle SOLACTIVE’ ETF, which invests in the electric vehicle and secondary battery industries, recorded the lowest return of -32.3%, followed by TIGER Global Lithium & Secondary Battery SOLACTIVE (-14%), TIGER Global Autonomous Driving & Electric Vehicle SOLACTIVE (-14%), TIGER KRX Secondary Battery K-New Deal (-13%), and KODEX Secondary Battery Industry (-9%).
Electric vehicle-related ETFs were hit by deteriorating investor sentiment as prices of key raw materials such as nickel and lithium surged due to Russia’s invasion of Ukraine, coupled with the U.S. Federal Reserve’s announcement of aggressive interest rate hikes. However, since the beginning of this month, major electric vehicle companies listed in the U.S. and domestic stock markets have shown an upward trend based on stable earnings, causing ETF performance to diverge depending on the investment country. Tesla, despite concerns over parts supply, increased sales volume, with its stock price recovering from around $760 to $1,005. In the domestic market, secondary battery material companies with strong pricing power, mainly cathode material firms, showed notable gains. Ecopro BM rose 23% in the past month, while L&F (22.54%) and Cosmo Advanced Materials (68.8%) also surged sharply.
The underperformance of only Chinese electric vehicle companies is largely due to the Chinese authorities’ lockdown policies. As some cities were locked down due to the spread of Omicron, delays in sales, production, and new model launches weakened both corporate earnings and valuations. The average daily automobile sales in China for April, counted up to the 17th, plummeted 48.4% compared to the previous month. Additionally, the ‘Beijing Auto Show’ scheduled for the 21st of last month was postponed indefinitely, delaying model launch schedules for major companies such as Li Auto and XPeng. Looking at the stock price trends of major companies invested in by TIGER China Electric Vehicle SOLACTIVE since the beginning of the year, most have declined, including BYD (-13%), Gangfeng Lithium (-29%), and Sungen InnoVance (-27%).
Jinsu Jeong, a researcher at Hyundai Motor Securities, said, "Although it has been confirmed that the economic damage from the prolonged Chinese lockdown is passing its peak, the remaining challenge is consumer sentiment," adding, "With recent electric vehicle price increases, consumers feel the price hikes more acutely, so it is necessary to consider the possibility of delayed recovery in automobile demand."
Meanwhile, domestic investors have purchased 665.8 billion KRW worth of TIGER China Electric Vehicle SOLACTIVE this year, maintaining expectations that the easing of the Chinese government’s lockdown policies will ignite a rise in Chinese electric vehicle ETF stock prices. It is also analyzed that the valuation attractiveness created by the stock price decline has played a part.
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