This is one of the biggest mistakes investors can make when it comes to the China trade, ETF analyst says

U.S.-China tensions shouldn't prevent you from staying diversified.

That's what two ETF researchers said this week as concerns grew around the rift between the world's two largest economies, with Zoom saying it would halt direct product sales to China and President Donald Trump issuing executive orders banning Chinese apps TikTok and WeChat.

"We see a lot of opportunity in the emerging markets and the United States," Jay Jacobs, senior vice president and head of research and strategy at Global X, said Monday on CNBC's "ETF Edge."

"Frankly, what we're seeing is a bifurcation of the entire technological world where you're going to have western technology and eastern technology with China and Southeast Asia quickly rising," he said. "We think investors need a foot in both sides of that equation."

With its suite of 11 China-based ETFs focused on that market's individual sectors, for Global X, "it's not a question of do you want China or do you not want China, it's a question of what part of China do you want?" Jacobs said.

One not-so-obvious area of the Chinese market worth considering is its consumer discretionary sector, which could benefit from the growth of Southeast Asia's middle class as China grows its regional influence, Jacobs said in a Monday email to CNBC. Global X tracks that group via its MSCI China Consumer Discretionary ETF (CHIQ).

The key question for investors is "do you want the old economy that includes energy and financials and industrials where it was really about industrializing China very quickly, or do you want the new economy, which was really led by technology firms and communications firms?" Jacobs said.

"Some Chinese technology names are some of the fastest-growing companies out there and they're creating very disruptive platforms very quickly," he said. "I think it would be a mistake for investors to not be playing both sides of that trade."

Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA, emphasized the importance of staying diversified.

"We hear from many investors that they want to be careful how much exposure they have to China within their portfolio without fully being aware that roughly 40% of emerging market ETFs have exposure to China," he said in the same "ETF Edge" interview.

That includes iShares' MSCI Emerging Markets ETF (EEM) and Core MSCI Emerging Markets ETF (IEMG) as well as Vanguard's FTSE Emerging Markets Index Fund ETF Shares (VWO). They have 41%, 38% and 43.5% weightings towards China, respectively.

In short, in most investors' cases, "you are heavily weighted towards China directly whether you want to be or not" unless you choose an international ETF that specifically exclude China, such as Alpha Architects' Freedom 100 Emerging Markets ETF (FRDM), Rosenbluth said.

"That said, China's actually performing quite well," he said, flagging the iShares MSCI China ETF (MCHI)'s 13% rise year to date. "It actually is leading the broader emerging markets. So, it's been good to the portfolio whether people want to have it or not."

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