CSOP Asset Management has launched the first ETF in Hong Kong to provide exposure to companies listed on Shanghai Stock Exchange’s innovative STAR Market.
Melody He, Managing Director, Head of Business Development and Product Strategy & Solutions, at CSOP Asset Management.
The CSOP STAR 50 Index ETF (3109 HK) has listed on the Stock Exchange of Hong Kong in Hong Kong dollars and comes with a management fee of 0.99%.
Officially called the Shanghai Stock Exchange Science and Technology Innovation Board, the STAR Market is perceived as China’s equivalent to Nasdaq, offering a less-cumbersome route to public markets for home-grown, high-growth science and technology companies.
The board was designed to promote innovation in China by supporting investment in ambitious, emerging companies from new technology sectors. This role has become more important as the US has recently sought to tighten restrictions on Chinese companies listing on its exchanges.
The STAR Market currently houses more than 222 firms with a total market value in excess of $550 billion. While the majority of STAR-listed firms hail from the information technology sector, including chipmakers and software designers, the platform also hosts firms from a diverse range of new-generation industries including biomedicine, new energy, advanced equipment manufacturing, and environmental protection.
Eligible STAR Market A-shares were also included in the China-Hong Kong Stock Connect from 1 February.
Methodology
The ETF is linked to the SSE Science and Technology Innovation Board 50 Index – dubbed the SSE STAR 50 Index – which comprises the 50 largest securities listed on the STAR Market while accounting for liquidity constraints.
Constituents are weighted by float-adjusted market capitalization while capping the weight of any single stock at 10% and the aggregate weight of the top five constituents at 40%.
As of 8 February, information technology stocks accounted for nearly two-thirds (63.9%) of the index weight followed by stocks from the healthcare (10.9%), industrials (8.9%), and telecommunications (7.6%) sectors. The largest single stock positions were Montage Technology (9.1%), Semiconductor Manufacturing International (8.3%), Beijing Kingsoft Office Software (7.9%), Shenzhen Transsion (7.6%), and Advanced Micro-Fabrication Equipment (6.1%).
Melody He, Managing Director, Head of Business Development and Product Strategy & Solutions, CSOP Asset Management, said: “The STAR 50 Index is widely deemed as an index representing the performance of the rising stars in the science and technology sectors in China, and we are very glad to bring an ETF tracking this index to the market.
“Technology is reshaping our life is an unprecedented pace. The listing of the ETF, together with the ICBC CSOP S&P New China Sectors ETF (3167 HK), CSOP Hang Seng TECH Index ETF (3033 HK), and CSOP Yinhua CSI 5G Communications Theme ETF (3193 HK) will help investors capture the investment opportunities amid the fast-growing China in an easy and transparent way.”
US investors can gain access to the STAR Market through the KraneShares SSE STAR Market 50 Index ETF (KSTR US) which also tracks the SSE STAR 50 Index. This fund listed on NYSE Arca at the end of January and comes with an expense ratio of 0.89%.
As yet there are no European ETFs providing comparable exposure.