CSOP Asset Management has launched a new thematic equity ETF in Hong Kong providing exposure to China A-share companies involved in the photovoltaic (solar energy) industry.
The ETF provides exposure to companies across the value chain of China’s photovoltaic industry.
The CSOP Huatai-Pinebridge CSI Photovoltaic Industry ETF (3134 HK) has listed on the Stock Exchange of Hong Kong and comes with a management fee of 0.99%.
Bright future
According to CSOP, the photovoltaic industry is one of the high-conviction sectors in China with huge growth potential owing to its importance in helping the country achieve carbon neutrality over the long term.
China is already the leader in the global photovoltaic industry, particularly in areas pertaining to semiconductor materials and photovoltaic cells, modules, and systems, according to the International Renewable Energy Agency.
Further growth is expected as major technological advancements over the past decade have significantly reduced costs, making solar energy a cheaper source of electricity than coal and fossil-fuel-based power generation.
The sector is also expected to benefit from ongoing fiscal support with the Chinese government including carbon emission reduction targets into its most recent five-year economic growth plan.
Methodology
The fund has come to market through the China-Hong Kong “ETF Connect” scheme which allows for the cross-listing of ETFs between Hong Kong and mainland China markets.
The fund is a so-called ‘feeder’ ETF that gains its exposure by investing, via approved QFI channels, at least 90% of its assets in the Shanghai-listed Huatai-Pinebridge CSI Photovoltaic Industry ETF.
By way of the Huatai-Pinebridge ETF, the new CSOP ETF tracks the CSI Photovoltaic Industry Index. The index selects its constituents from the total universe of Chinese A-shares, excluding companies that rank in the bottom quintile by average daily trading volume.
The methodology identifies companies engaged across the photovoltaic industrial chain from materials in the upstream, cells and modules in the midstream, and systems in the downstream. The process involves screening for firms with business operations linked to silicon pellets, polysilicon, solar cells, electric cables, photovoltaic glass, inverters, and photovoltaic plants.
The largest 50 relevant companies are selected and weighted by float-adjusted market capitalization subject to a cap of 10% on any single stock. The index is reconstituted and rebalanced on a semi-annual basis.
As of 1 June, over three-quarters (77.0%) of the index was allocated to stocks from the industrials sector with the consumer staples and utility sectors making up the next-largest exposures at 11.0% and 5.2%, respectively. Notable positions included Sungrow Power Supply (11.8%), Longi Green Energy Technology (11.2%), Tongwei (11.1%), Wuxi Lead Intelligent Equipment (7.1%), Tianjin Zhonghuan Semiconductor (6.3%), and TBEA (5.2%).
The fund will likely compete against the broader Global X China Clean Energy ETF (9809 HK) which provides exposure to a range of clean energy-related industries in China by tracking the Solactive China Clean Energy Index. The index covers Chinese A-shares available through the Stock Connect programme as well as Chinese firms listed in the US or Hong Kong. The ETF launched in January 2020 and has accumulated more than HK$3.1 billion ($400m) in assets. It comes with an expense ratio of 0.68%.