Is the China Electric Vehicle ETF a Good Choice?

[Asia Economy Reporter Junho Hwang] Domestic listed Chinese electric vehicle exchange-traded funds (ETFs) have shown disappointing performance since the end of last month.

According to the Korea Exchange on the 7th, Chinese electric vehicle ETFs are plummeting without resistance. TIGER China Electric Vehicle SOLACTIVE, with net assets of 3.3748 trillion KRW, fell 13.11% from the 23rd of last month to the day before yesterday. KODEX China Secondary Battery MSCI also plunged 11.89%. ETFs investing in the global electric vehicle market, such as KINDEX G2 Electric Vehicle & Autonomous Driving Active (-6.03%) and TIGER Global Autonomous Driving & Electric Vehicle SOLACTIVE (-1.2%), performed relatively better but could not stop the downward trend.

The enactment of the U.S. Inflation Reduction Act (IRA), geopolitical conflicts surrounding Taiwan, and city lockdowns due to the resurgence of COVID-19 have hindered the market. In particular, Berkshire Hathaway, the investment company of Warren Buffett, known as the "Sage of Omaha," disclosed on the 2nd that as of the 1st, it holds 270 million shares, equivalent to 18.87% of BYD stock, causing BYD's stock price to slide on the Hong Kong stock market on the 5th. On July 24th, Berkshire Hathaway also reduced its stake from 20.04% to 19.92%, and additional sales led to a decline in the stock price. BYD is a major investment target of domestically listed ETFs.

Park In-geum, a researcher at NH Investment & Securities, explained, "Due to concerns over semiconductor supply disruptions arising from the progress of Chip4, a semiconductor production and supply chain consortium led by the U.S., automobile sector stock prices are showing weakness."

However, experts note that the Chinese battery sector's valuation pressure eased after an 11% correction last month, and the expected sales volume of Chinese electric vehicles last month is projected to reach 625,000 units, doubling compared to the previous year. Jung Jin-soo, a researcher at Hyundai Motor Securities, stated, "Flagship models from each company are scheduled to be fully deployed in the second half of this year," adding, "The future electric vehicle market will continue to see BYD's dominance and intense 'market share battles' among startups."