EWH ETF

EWH's high exposure to financial and real estate sectors, impacted by China's housing bubble and weak economy, poses significant risks for investors. Despite a recent surge due to Chinese government stimulus, EWH's long-term earnings growth rate has been declining since 2012. EWH's current valuation is not expensive but isn't attractive either, given its weak earnings growth outlook and political risks.

iShares MSCI Hong Kong ETF offers exposure to the Hong Kong stock market and could potentially offer high returns if the market rebounds. The EWH ETF holds a portfolio of 31 stocks, with the top five positions making up 47% of the fund, including AIA Group and Hong Kong Exchanges and Clearing Limited. EWH has significant exposure to the real estate and financial sectors, which could negatively affect its performance if these sectors experience further downturns.

After another big drawdown in 2023, Hong Kong equities have largely been written off by investors. But with the country about to import a big Fed easing cycle, this is a market that could surprise many this year. As the largest and most liquid vehicle, EWH remains a great way to express a single-country contrarian view on Hong Kong.

BlackRock's iShares Hong Kong ETF had a poor performance in 2023, with Hong Kong's Hang Seng Index declining for four consecutive years. In times like this, it is important to hold "quality stocks". We examine the top 10 holdings in EWH looking for quality.

China's real estate trends indicate that, despite strong PMI, there's a substantial affordability crisis among its masses. Rising joblessness among the youth in now-quashed government data indicates a burgeoning "lost generation" is in the making.

Hong Kong's economic data has begun to show deterioration. While the consumption rebound theme is playing out, the ex-consumption weakness is concerning. Following a series of downward revisions to its earnings base, the iShares MSCI Hong Kong ETF now screens richly.