Daiwa launches two Chinese innovation ETFs including Japan’s first STAR Market fund

Apr 8th, 2021 | By | Category: Equities

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Daiwa Asset Management has launched two new equity ETFs on Tokyo Stock Exchange providing exposure to innovative Chinese companies.

Daiwa launches two Chinese innovation ETFs including Japan’s first STAR Market fund

Daiwa Asset Management has introduced Japan’s first ETF to target companies listed on China’s innovative STAR Market.

The iFreeETF China STAR50 (2628 JP) is Japan’s first ETF to target companies listed on the Shanghai Stock Exchange’s Science and Technology Innovation Board.

Known as the STAR Market, the board is a listing and trading venue for Chinese science and technology companies operating in high-tech and strategic emerging industries.

The second launch is the iFreeETF China GBA100 (2629 JP) which reflects the performance of the most advanced enterprises in the Greater Bay Area, a megalopolis consisting of nine cities and two special administrative regions in South China that is home to a majority of China’s most innovative technology companies.

STAR Market

The iFreeETF China STAR50 (2628 JP) tracks the SSE Science and Technology Innovation Board 50 Index (known as the SSE Star 50 Index). The index consists of 50 securities listed on STAR Market with the largest market capitalizations and highest average daily trading volumes in the past year.

Securities must have at least twelve months of trading history to be eligible for inclusion unless they are ranked in the top five or top three by market capitalization, in which case the trading history requirement is reduced to three months or one month respectively, subject to approval by the index’s advisory committee.

The construction methodology ranks the securities on the board by the average daily trading value over the past year in descending order and deletes the bottom 10% of securities. The remaining securities are then ranked by average daily total market capitalization over the past year with the top 50 selected for inclusion.

Constituents are weighted by float-adjusted market capitalization. To reduce turnover, the methodology incorporates buffer rules so that the number of constituents adjusted at each quarterly review does not normally exceed 10%.

The ETF comes with an expense ratio of 0.96%.

Greater Bay Area

The iFreeETF China GBA100, meanwhile, tracks the GBA Innovation 100 Index. The index selects its constituents from a universe of stocks that are listed in mainland China or Hong Kong and headquartered in the Greater Bay Area (consisting of Guangzhou, Shenzhen, Zhuhai, Foshan, Huizhou, Dongguan, Zhongshan, Jiangmen, and Zhaoqing, and the Special Administrative Regions of Hong Kong and Macao).

The methodology harnesses the capabilities of CCID Consulting, a major Chinese consulting firm and direct affiliate to the China Center for Information Industry Development, to select the 100 most innovative companies across a range of strategic industries including advanced manufacturing, modern service, and the marine economy, among others.

Constituents are weighted by float-adjusted market capitalization subject to security and sector caps of 10% and 30% respectively.

The ETF comes with an expense ratio of 0.71%.

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