VanEck launches GARP-focused China ‘new economy’ ETF on ASX

Nov 19th, 2018 | By | Category: Equities

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VanEck has unveiled the VanEck Vectors China New Economy ETF (CNEW AU) on the Australian Securities Exchange.

VanEck launches China new economy ETF on ASX

The fund provides exposure to firms from China’s ‘New Economy’ sectors that have strong ‘growth at a reasonable price’ characteristics.

The fund tracks a diversified portfolio of China A-share companies operating in the ‘New Economy’ sectors of the Chinese economy.

These sectors include technology, health care, consumer staples and consumer discretionary.

The underlying reference for the ETF is the CSI MarketGrader China New Economy Index which selects 120 firms with the best ‘growth at a reasonable price’ (GARP) attributes, according to data from equity research and indexing company MarketGrader.

Companies are selected on the basis of the strength of 24 fundamental indicators across four factor categories: growth, value, profitability and cash flow.

To be eligible for inclusion, stocks must have a minimum total market cap of RMB 1.38 billion (approximately $200 million) and a three-month daily traded value in excess of RMB 13.8m and 12-month aggregate trading volume in excess of RMB 345m. Companies that have recorded losses consecutively for the past two years are also not eligible for selection.

At least 20% of all index constituents – 24 companies, six from each sector – must be designated large or mid-caps, according to MarketGrader’s annual size classification. The index is equally weighted.

To maintain its GARP focus, it is reconstituted and rebalanced twice a year, in June and December, removing firms whose fundamental quality may have been eroded or whose share price no longer represents an attractive buy.

The largest industry exposures are currently Food, Beverage & Tobacco (23.3%), Pharmaceuticals & Biotechnology (18.9%), Consumer Durables & Apparel (12.7%), and Technology Hardware & Equipment (11.9%).

The fund comes with a management fee of 0.95%. Distributions are made to investors on an annual basis.

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