HSBC launches India tech ETF

Mar 6th, 2024 | By | Category: Equities

HSBC Asset Management has introduced a new thematic ETF in Europe targeting Indian equities from technology and technology-enabled sectors.

Olga de Tapia, Global Head of ETF & Indexing Sales, HSBC Asset Management

Olga de Tapia, Global Head of ETF and Indexing Sales at HSBC Asset Management.

The HSBC S&P India Tech UCITS ETF has been listed on the London Stock Exchange in pound sterling (HITC LN) as well as on Deutsche Börse Xetra (H41X GY) and Borsa Italiana (HITC IM) in euros.

India, the third-largest emerging market and the fastest-growing major economy globally, is experiencing rapid digital and demographic shifts. With a significant portion of the global Generation Z population, a middle class expected to double by 2030, and an influx of 25 million new smartphone users each quarter, the country is primed for a digital revolution.

The ‘Digital India’ campaign, initiated by President Modi in 2015 to foster a trillion-dollar digital economy by 2025, further amplifies this growth, highlighting the government’s commitment to bolstering technology sectors and infrastructure.

Analysts predict these factors collectively herald India’s entry into a digital golden age.

Olga de Tapia, Global Head of ETF & Indexing Sales at HSBC Asset Management, commented: “We are pleased to have launched the HSBC India Tech UCITS ETF to provide investors with access to the rapidly evolving technology space in India.

“In our view, India is fast becoming a hot bed of new world technology sectors offering exciting investment opportunities, having transitioned from its previous model as a heavy exporter of SAAS (software as a service) to develop more innovative tech solutions.”

Methodology

The fund is linked to the S&P India Tech Index which selects its constituents from an initial universe of India-listed companies with market capitalizations above $300 million and average daily trading values greater than $1m.

The selection process targets companies that generate a minimum of 90% of their income from digital technology, communication, and software sectors, as categorized by FactSet’s Revere Business Industry Classification System (RBICS). This strategy aims to present investors with a portfolio broader than solely information technology firms, capturing a spectrum of tech-centric companies across various industries.

The index features a diverse range of participants, including enterprises involved in virtual reality equipment, business intelligence software, automotive software, online electronics retail, wireless services, payment processing, insurance software, and data centers, ensuring a comprehensive technology market representation.

Constituents are weighted by float-adjusted market capitalization subject to a cap of 15% on the largest position and a cap of 10% on any other stock. The index contains buffer rules to limit unnecessary turnover during reconstitutions.

As of the end of February, information technology stocks accounted for over two-thirds (70.1%) of the index weight with the next-largest sector weights being communication services (21.5%) and financials (6.3%).

The index contained 38 constituents with the most notable positions being Infosys (14.2%), HCL Technologies (10.8%), Bharti Airtel (10.7%), Tata Consultancy Services (10.0%), Tech Mahindra (6.7%), Wipro (5.6%), and LTIMindtree (4.8%).

The ETF comes with an expense ratio of 0.65%.

For those interested in tech-focused Indian equity exposure, the INQQ India Internet & Ecommerce ESG-S UCITS ETF (INQQ LN) offers an alternative opportunity. The fund focuses on companies generating at least 50% of their income from internet and e-commerce operations, covering a broad spectrum of digital sectors including internet services, online retail, broadcasting, media, advertising, travel, gaming, search engines, and social networking. It has an expense ratio of 0.86%.

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