Lion Global Investors, a Singapore-based asset manager, has partnered with local brokerage OCBC Securities to create the city state’s first technology-focused ETF.
Gerard Lee, Chief Executive Officer at Lion Global Investors.
The Lion-OCBC Securities Hang Seng TECH ETF is set to begin trading on Singapore Exchange on 10 December and will be available in Singapore dollar (HST SP) and US dollar (HSS SP) share classes.
The fund provides pure-play exposure to the fast-growing Chinese technology sector by tracking the innovative Hang Seng TECH Index.
The index consists of Greater China-incorporated stocks that have high business exposure to the internet, fintech, cloud computing, e-commerce, and digital technology themes.
Companies must either specifically be “technology-enabled” (i.e. operate primarily on an internet or mobile platform) or have an R&D expenses-to-revenue ratio that is greater than or equal to 5% or revenue growth that is greater than or equal to 10%.
The 30 largest stocks as ranked by market capitalization 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.
As of October 2020, over two-thirds (68%) of the index was allocated to the information technology sector with modest allocations to industrials (12%), healthcare (11%), consumer discretionary (7%), and financials (2%).
Major positions currently include well-known Chinese names such as Xiaomi, Meituan Dianping, Alibaba, Tencent, Sunny Optical, JD.com. Other familiar holdings include Lenovo, NetEase, and Ping An Healthcare & Technology.
The index is reviewed on a quarterly basis but also includes a ‘Fast Entry Rule’ to facilitate fast-tracked inclusion for qualified IPOs that rank in the index’s top ten by market cap.
Gerard Lee, Chief Executive Officer at Lion Global Investors, said, “The Lion-OCBC Securities Hang Seng TECH ETF allows investors in Singapore a convenient and cheap way of investing in a secular trend that is underway. Other than investing in the merits of companies at the forefront of disruption and innovation, this ETF gives investors an easy avenue to express their view on fundamental changes happening in geopolitics. The superpower rivalry between China and the US has resulted in a bipolar world where the tech champions in our time zone will be listed in Asia instead of the US.”
Wilson He, Managing Director of OCBC Securities, added, “We have seen how the pandemic impacted our lives and how technology has stepped in to give a glimpse of normalcy in the changed world. The technology sector has significantly outperformed the broader equity market during this period and technology stocks have benefitted from changes in consumer behavior as well as the digital transformation of businesses. The Lion-OCBC Securities Hang Seng TECH ETF comes at the right time to ride this wave of change and bullish sentiment.”
The ETF will list with a management fee of 0.45% and an expense ratio that will be capped at 0.68% for the first two years.
The fund is expected to begin trading with a minimum investment amount of less than S$20, making it accessible to a wide audience of investors.
OCBC Securities anticipates that the ETF will see significant demand, noting that trading volume for Hong Kong-listed equities on its platform has grown by more than 30% compared to the same period last year with Chinese technology companies consistently ranking among the top traded counters. Furthermore, the firm highlights a surge of interest in ETFs among retail investors with trading volume in the first 10 months of 2020 already triple that of last year.