KraneShares has unveiled a new thematic equity ETF providing exposure to Chinese companies engaged in 5G and semiconductor-related businesses.
Jonathan Krane, CEO of KraneShares.
The KraneShares CICC China 5G & Semiconductor ETF (KFVG US) listed on NYSE Arca on November 24 and has already surpassed $100 million in assets under management.
The fund is linked to the CICC China 5G and Semiconductor Leaders Index, an index developed by the research team at China International Capital Corporation (CICC).
The index screens for China-domiciled companies that are classified by a fuzzy logic industry classification system as being in one of the following industries: semiconductor manufacturing, semiconductor equipment and services, manufacturing equipment and services, internet and data services, electronic equipment manufacturing, electronic components, consumer electronics, computer hardware and storage, communications equipment and commercial electronics.
All types of Chinese share classes, including A-Shares, B-Shares, H-Shares, P-Chips, and Red Chips, are eligible for selection as long as they have average daily trading values above $1m.
The index selects the 30 largest eligible companies and weights them by float-adjusted market capitalization subject to a cap of 10% on any single stock and a cumulative cap of 45% on all stocks with weights greater than 5%.
Reconstitution and rebalancing occur on a quarterly basis with buffer rules helping to limit unnecessary turnover.
The ETF comes with an expense ratio of 0.65%.
World leader in 5G
China has emerged as a world leader in 5G spending and adoption. According to research from UBS, China is projected to have over 400 million 5G users by 2025, accounting for 40% of total global use.
To support this growth, China is cultivating its domestic semiconductor production capacity through government policies such as the “Made in China 2025” initiative which includes the goal of China becoming a completely self-sufficient semiconductor producer by 2030.
According to KraneShares, this drive shows that China realizes the immense potential of the 5G revolution which will enable data-intensive processes to be implemented anywhere at broadband speeds. Applicable functions include real-time communication among autonomous vehicles, AI-integrated robotic devices for remote surgeries, and sensors enabling significant energy conservation within homes and in smart cities, among countless others.
Jonathan Krane, CEO of KraneShares, commented, “The advent of 5G is fundamentally changing the way people interact with technology and the world in which we live. China is the world leader in 5G adoption which is providing a tremendous catalyst across various sectors and industries in China.”