Fullgoal launches China SOE innovation ETF on SZSE

Dec 20th, 2019 | By | Category: Equities

Fullgoal Asset Management has launched a new equity ETF on Shenzhen Stock Exchange providing exposure to state-owned enterprises (SOEs) that exhibit robust technological innovation.

Fullgoal launches China SOE innovation ETF on SZSE

The fund provides exposure to Chinese SOEs that exhibit robust technological innovation.

The Fullgoal CSI Central-SOEs’ Innovation Driven ETF (159974 CH) is linked to the CSI Central-SOEs Technological Innovation Index.

The index selects its constituents from the CSI All Share Index universe, a comprehensive benchmark covering all A-share stocks that have been listed for at least three months.

A-shares are Mainland-listed and domiciled, renminbi-denominated stocks that trade on either the Shanghai or Shenzhen stock exchanges.

The universe is first ranked by average daily trading value over the past year in descending order and the bottom 20% of stocks are removed.

The methodology then identifies companies defined as SOEs (more than 50% of total share ownership is held by the Chinese government) operating in any sector except for financials and real estate.

Each SOE is then assigned a ‘technological innovation’ score based on five metrics: the ratio of accumulated research and development (R&D) expenses over the past three years to operating revenue; number of R&D personnel employed by the firm; quality of patents held by the firm; participation in the formulation of national or industrial technical standards; and operating revenue growth. The stocks are ranked by their technological innovation scores in descending order and the bottom 50% are removed.

Lastly, from the remaining selection pool, the 100 stocks with the largest float-adjusted market caps are selected to comprise the index.

Index constituents are then weighted by float-adjusted market capitalization subject to an individual cap of 5%. Reconstitution and rebalancing occur on a semi-annual basis.

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