This may be the ‘missing piece’ for investors looking to boost AI exposure — SkimNews
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- Andrew Mattock, Matthews Asia portfolio manager, told CNBC's "ETF Edge" that China is the "big piece" investors are missing for AI exposure and that plain-vanilla emerging-market strategies won't deliver it.
- iShares MSCI Emerging Markets ETF (EEM) is roughly half composed of South Korean and Taiwanese companies, per Mattock, so investors using it get minimal China weight in their AI bet.
- iShares MSCI China ETF (MCHI) lacks an AI focus, Mattock said, reinforcing the case for deliberate stock-picking inside China rather than a broad ETF wrapper.
- Matthews China Fund (MCHFX), the fund Mattock manages, invests at least 80% of net assets in Chinese common and preferred stocks and is off 4% year-to-date as of Friday's close, with Tencent and Alibaba as its largest holdings.
- David Tepper, Appaloosa Management founder, told CNBC in September 2024 he bought more of "everything" related to China, telegraphing renewed institutional appetite for the world's second-largest economy.
- KraneShares CIO Brendan Ahern recommended using options around KWEB and similar ETFs to hedge wild China swings; the KraneShares CSI China Internet ETF shares Tencent and Alibaba as its top two holdings with MCHFX but is down more than 27% year-to-date.
Why it matters: The structural problem Mattock identifies is concrete: roughly half of EEM sits in Korea and Taiwan, leaving China — and thus a meaningful slice of the global AI supply chain — underweighted in the most popular EM wrapper. For investors, the trade-off is sharp: MCHFX is down 4% YTD while KWEB, with identical top holdings, is off more than 27%, so the path to China AI exposure now demands both deliberate fund selection and an explicit hedge strategy.
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