Hong Kong-based Premia Partners has expanded its product line-up with the launch of a STAR 50 ETF on HKEX.
Rebecca Chua, Managing Partner of Premia Partners.
Physically replicated, the Premia STAR 50 ETF offers access to the largest and most liquid stocks traded on the Science and Technology Innovation Board of the Shanghai Stock Exchange.
Known as the STAR Market, the recently introduced board is a listing and trading venue for Chinese science and technology companies operating in high-tech and strategic emerging industries.
Companies listed on it are typically characterized by pioneering technology, advanced scientific innovation, and high levels of research and development expenditure.
Since its establishment in July 2019, the board has become one of the largest IPO markets globally and a premier listing venue for prominent Chinese unicorns (privately held startup companies valued at over $1 billion).
The fund has been listed with HKD (3151 HK), USD (9151 HK) and RMB (83151 HK) share classes and comes with a total expense ratio of 0.58%.
Methodology
The fund is linked to the SSE Science and Technology Innovation Board 50 Index (known as the SSE Star 50 index) and invests directly in index constituents by utilising either the manager’s status as a qualified foreign institutional investor or the Shanghai-Hong Kong Stock Connect programme.
Developed and calculated by China Securities Index Company, the index consists of 50 securities listed on STAR Market with the largest market capitalizations and highest average daily trading volumes in the past year.
Securities must have at least twelve months of trading history to be eligible for inclusion unless they are ranked in the top five or top three by market capitalisation, in which case the trading history requirement is reduced to three months or one month respectively, subject to approval by the index’s advisory committee.
The construction methodology ranks the securities on the board by the average daily trading value over the past year in descending order and deletes the bottom 10% of securities. The remaining securities are then ranked by average daily total market capitalisation over the past year with the top 50 selected for inclusion.
Constituents are weighted by free-float-adjusted market capitalisation with reconstitution and rebalancing occurring quarterly in March, June, September and December. To reduce turnover, the methodology incorporates buffer rules so that the number of constituents adjusted at each quarterly review does not normally exceed 10%.
Companies residing in the information technology sector presently account for almost two-thirds of the index by weight with aggregate exposure of 63.7%.
Notable positions include Semiconductor Manufacturing International (8.5%), Beijing Kingsoft Office Software (6.7%), Advanced Micro-Fabrication Equipment (5.6%), Shenzhen Transsion (4.3%), Ningbo Ronbay New Energy Technology (3.6%), Montage Technology (3.4%), Amlogic (3.1%), Beijing Roborock Technology (3.0%), Jiangsu Cnano Technology (2.8%) and Raytron Technology (2.8%).
‘Long-term growth opportunities’
Commenting on the launch, Rebecca Chua, Managing Partner of Premia Partners, said: “We are delighted to launch the ETF at this opportune time as investors increasingly become interested in the STAR Board as they broaden China allocation for long-term growth opportunities. Consistent with all Premia ETFs, it is designed as a low-cost and transparent allocation tool for international investors to access STAR Board opportunities, which are not fully accessible through the Stock Connect.”
Suyuan Lu, General Manager of China Securities Index Company, added: “The STAR 50 Index is the first flagship index to capture the most representative stocks and CDR constituents of the STAR Board, with broad representation and distinct innovation industry focus. We have maintained very good rapport with Premia Partners through our years of collaboration, and look forward to working more closely together, to assist international investors better access the China opportunities through more relevant and best practice solutions.”
From a fund selection perspective, the fund will line up against other Hong Kong-listed STAR 50 ETFs including the CSOP STAR 50 Index ETF (3109 HK) at 0.99% from CSOP and the Bosera STAR 50 Index ETF (2832 HK / 82832 HK) at 0.88% from Bosera.
European and US-based investors can gain access to the index via ETFs from KraneShares. The KraneShares ICBCCS SSE STAR Market 50 Index UCITS ETF is listed on LSE (KSTR LN) and Borsa Italiana (KSTR IM), while the KraneShares SSE STAR Market 50 Index ETF is listed on NYSE Arca (KSTR US).