Global X has launched two new China-focused equity ETFs on HKEX – the Global X China Innovator Active ETF (3058 HK) and the Global X China Global Leaders ETF (3050 HK).
JH Rhee, Chief Executive Officer of Mirae Asset Global Investments (Hong Kong).
The funds are managed out of the Hong Kong office of Mirae Asset Global Investments, Global X’s South Korean owner.
The Global X China Innovator Active ETF targets high-growth companies with innovative and disruptive business models, while the Global X China Global Leaders ETF targets market-leading companies that generate substational oveseas revenue.
Both funds trade in Hong Kong dollars and are derived from a universe of stocks that includes companies headquartered or incorporated in mainland China, Hong Kong or Macau that are listed in Shanghai, Shenzhen or Hong Kong, or on NYSE or Nasdaq.
Jung Ho Rhee, Chief Executive Officer of Mirae Asset Global Investments (Hong Kong), commented: “Innovation and technological development play a critical role in China’s economic growth and transformation. The launch of the two ETFs unites Mirae Asset’s strong product innovation, research capability, and expertise in thematic investing.
“Investors will be able to unlock China’s high growth potential in a cost-efficient manner and also access the power of active management, at a time when many of China’s leading companies are growing significantly at home and abroad.”
Chinese innovators
The Global X China Innovator Active ETF is actively managed, combining top-down and bottom-up processes.
The fund’s managers leverage Global X’s thematic research capabilities to identify long-term, structural themes that are reshaping China’s economy through technological advancements, changing demographics and consumer preferences, or adaptations to the physical environment.
Themes that fit this profile currently include artificial intelligence, autonomous and electric vehicles, climate change, cloud computing, cybersecurity, e-commerce, education, fintech, 5G and the internet of things, healthcare innovation, infrastructure development, longevity, emerging markets consumers, robotics, artificial intelligence, social media, and video games and e-sports.
The managers then deploy a fundamental, bottom-up approach to select specific stocks, with around 40 held in the portfolio. The managers consider factors such as valuation, financial strength, competitive position in the industry, management track record, the sustainability of returns, and regulatory and political risks.
As of 15 March, notable positions included Ping An Healthcare (5.9%), Tencent (5.8%), Alibaba (5.0%), BYD (4.8%), Longi Green Energy (4.6%), and Smoore International (3.7%).
The fund comes with estimated ongoing charges of 0.75%.
Global leaders
The Global X China Global Leaders ETF is linked to the FactSet China Global Leaders Index, a rules-based strategy index that is constructed using the FactSet Revere Business Industry Classification System (RBICS).
The methodology first identifies companies that rank in the top two globally for most revenue generated within any RBICS industry group. Companies that are identified through this screen must derive at least 25% of their total revenue from the relevant RBICS industry group.
To ensure the index targets Chinese firms with a genuinely global presence, companies must also generate more than 25% of their revenue from business operations outside of Greater China and have a greater number of overseas customers than domestic customers.
The 30 largest companies that meet these criteria are selected to form the index with companies weighted by float-adjusted market capitalization subject to a single security cap of 7% and an aggregate cap of 50% on all stocks from the technology sector. The index is reconstituted and rebalanced semi-annually.
As of 15 March, notable positions included Wanhua Chemical (8.3%), Techtronic Industries (8.2%), BOE Technology (7.3%), Shenzhou International (7.2%), Haier Smart Home (7.1%), Longi Green Energy (6.4%), and Xoaomi (5.6%).
The fund has estimated ongoing charges of 0.68%.