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New York-based Global X has launched a new ETF in Hong Kong providing exposure to innovative Chinese companies as represented by the Hang Seng TECH Index.
The index targets technology-enabled companies from innovative sectors of the Chinese economy.
The Global X Hang Seng TECH ETF (2837 HK) has been listed on the Stock Exchange of Hong Kong in Hong Kong dollars.
The Hang Seng TECH Index consists of Greater China-incorporated stocks selected from the industrials, consumer discretionary, healthcare, financials, or information technology sectors.
Hang Seng Indexes screens for firms that have high business exposure to internet, fintech, cloud computing, e-commerce, or digital technology themes.
Companies must also be “technology-enabled” (i.e. operate primarily on an internet or mobile platform), have an R&D expenses-to-revenue ratio that is greater than or equal to 5%, or have revenue growth that is greater than or equal to 10%.
The 30 largest stocks that meet these criteria are selected to form the index. Constituents are weighted by free-float market capitalization, subject to a cap of 8% on any individual stock.
The index is reviewed on a quarterly basis and includes a ‘Fast Entry Rule’ to facilitate fast-tracked inclusion for suitably qualified high-growth tech stocks emerging from the IPO pipeline.
As of the end of February, over three-quarters (76.6%) of the index was dedicated to stocks from the information technology sector with consumer discretionary (10.7%), healthcare (6.5%), industrials (4.9%), and financials (1.2%) making up the remaining sector allocation.
Major positions included Tencent, Xiaomi, Alibaba, Kuaishou, Meituan, JD.com, and NetEase with each stock possessing a weight between 5-9%.
The ETF comes with a management fee of 0.35% and estimated ongoing charges over a year of 0.45%.
The fund is the fifth Hong Kong-listed ETF to track the in-demand Hang Seng TECH Index following the introduction of similar funds by CSOP Asset Management, China Asset Management Company, Hang Seng Investment Management, and BlackRock.
The HK$12.5 billion (approx. $1.6bn) iShares Hang Seng TECH ETF (3067 HK) is the cheapest with a management fee of just 0.25%.