CSOP Asset Management has launched the first ETF to be linked to the newly introduced Hang Seng TECH Index.

Melody He, Managing Director, Head of Business Development and Product Strategy & Solutions, CSOP Asset Management.

The CSOP Hang Seng TECH Index ETF (3033 HK) has listed on the Stock Exchange of Hong Kong and is tradeable in Hong Kong dollars.

It is physically replicated and comes with a management fee of 0.99%; annual ongoing charges are estimated to be 1.49%.

The ETF enables investors to gain pure-play exposure to the fast-growing Chinese technology sector.

The underlying Hang Seng TECH Index was unveiled by Hang Seng Indexes last month and capitalizes on the increasing number of big-name tech companies that are choosing to list in Hong Kong.

It was conceived with ETFs very much in mind and is being presented by Hang Seng as one of its flagship indices.

Methodology

The index consists of Greater China-incorporated stocks that specifically have high business exposure to the internet, fintech, cloud computing, e-commerce and digital technology themes.

Companies must also 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.

Major positions currently include well-known Chinese names such as Meituan Dianping (10.7%), Xiaomi (10.1%), Alibaba (9.1%), Tencent (8.3%), Sunny Optical (6.7%), JD.com (5.8%). Other familiar holdings include Lenovo, NetEase, and Ping An Healthcare & Technology.

Companies formally assigned to the Information Technology sector contribute 45.6% of the holdings, followed by Consumer Discretionary with 30.1%, Communication Services with 13.9%, Health Care with 7.8%, and Financials with 2.2%.

With an eye on upcoming tech IPOs, the index includes a ‘Fast Entry Rule’ within its methodology to facilitate fast-tracked inclusion for qualified potential members. This provision is likely to ensure speedy inclusion for fintech giant Ant Financial, which is gearing up to float in Hong Kong.

‘Nasdaq of the East’

Commenting on the launch, Melody He, Managing Director, Head of Business Development and Product Strategy & Solutions at CSOP, said, “The Hang Seng TECH Index is widely deemed as a benchmark of technology-theme stocks listed in Hong Kong. Tracking the Hang Seng TECH Index, 3033 HK will meet the increasing investment demand of this technology sector among investors, offering market an easy, transparent and efficient investment tool to replicate the performance of the fast-growing Chinese technology sector.”

Ms. He noted that the Hang Seng TECH Index was being heralded as the “Nasdaq of the East” by some market participants and media outlets.

Anita Mo, Deputy CEO of Hang Seng Indexes Company, added, “The listing of Hang Seng TECH Index ETF product in Hong Kong will help to promote Hong Kong as a major financial centre for international technology companies and attract more investment funds into related ETFs. Following the launch of Hang Seng TECH Index (HSTECH), we hope that our index will reflect the performance of technology sector which is a growing segment in Hong Kong and attract more HSTECH Index-linked ETF products to be offered in the market.”

The ETF raised US$24 million in its initial pre-listing fundraise.

Authorised participants include BNP Paribas, Citigroup, Merril Lynch, Guotai Junan, China International Capital Corp, Haitong, HSBC, Valuable Capital, and ABN Amro.