Roundhill Investments has launched a new actively managed thematic equity ETF that focuses on a concentrated group of leading Chinese companies driving global innovation, known as the “China Dragons.”

China Dragons are top Chinese companies driving global innovation and technological leadership.

The Roundhill China Dragons ETF (DRAG US) has been listed on Cboe BZX Exchange with an expense ratio of 0.59%.

Unlike most broad-based Chinese equity ETFs, DRAG targets only the largest and most innovative Chinese firms, mitigating risks associated with smaller-cap stocks.

The fund thereby follows a structure similar to the popular Roundhill Magnificent Seven ETF (MAGS US), which focuses on top US tech stocks. MAGS has accumulated nearly $800 million in assets since its launch last year.

Dave Mazza, CEO of Roundhill Investments, highlighted DRAG’s timeliness, noting China’s attractive valuations and recent government stimulus efforts aimed at boosting its economy.

“DRAG offers a focused and efficient way for investors to capture the growth potential of these market leaders as China embarks on a new phase of economic support and technological advancement,” said Mazza.

The ETF employs a proprietary methodology that combines both quantitative and qualitative factors to identify its “China Dragons.” The selection universe starts with the 100 largest Chinese equities by market capitalization, which are then screened for market cap, liquidity, and technological innovation.

The portfolio seeks equal-weight exposure across the selected companies, with rebalancing occurring quarterly.

DRAG invests primarily through American Depository Receipts (ADRs) or derivatives like swaps to access these companies. The current portfolio includes nine Chinese tech giants, such as Tencent, Alibaba, Meituan, Baidu, and BYD.