Investing For Future Growth: UOBAM Ping An ChiNext ETF

A new ETF comprising fast-growing China enterprises will be listed on SGX.

In an environment today where it has become increasingly difficult to invest, the attributes of an exchange-traded fund stand out: low fees, lower beta risk, diversified portfolio, and trading flexibility.

As a quick background, the ChiNext Market was inaugurated in Shenzhen on the 23rd of October 2009 and served as an important platform for innovative and fast-growing companies to raise funds in the capital market. It has over 1,100 companies today that are listed on the ChiNext Market which made up of many different sectors.

The UOBAM Ping An ChiNext ETF, newly launched by UOB Asset Management, seeks to replicate the performance of the ChiNext Index as closely as possible, by investing all or substantially all of the Fund’s assets into the Ping An ChiNext ETF. The ChiNext Index selects the 100 largest and most liquid A-shares listed on the ChiNext Market and it rebalances semi-annually to ensure adherence to its objective.

Why Invest in the UOBAM Ping An ChiNext ETF?

Without a doubt, China will remain as a superpower and become an even stronger nation with its superior economical advantage over the next decade.

The ChiNext Market provides an important platform for implementing a national strategy of independent innovation and growth for the next decade. The acceleration of some of the themes mentioned in the recent inaugural 20th Party Congress will also drive China into being self-sustainable and the transformation of economic development mode of strategic importance.

For instance, authorities in China aim to cut energy intensity by 13.5% and carbon intensity by 18% over the next 5 years. It has charted out a course towards realizing the goals of having emissions peak by 2030 and achieving carbon neutrality by 2060 and push a drive towards a low-carbon economy – Source: CNBC 4^th October 2022

Other than clean energy, China will also focus on a few of these themes including but not limited to Electric Vehicles (EVs), Robotics and A.I, Cloud Computing, and Semiconductor technology.

These are names that will propel China’s growth for the next 5-year which investors can take opportunity of.

Composition of the ChiNext Index

If we look at the composition of the ChiNext Index, it allows exposure to many of the important themes highlighted above.

The top 10 constituents have exposures to EVs, Clean Energy, Biotechnology, and Robotics, which are themes that China wants to focus over the next 5-years.

Source: UOB Asset Management – as at 14 Sep 2022

One of the highest constituent compositions in the ETF with over 17% weightage is a company called Contemporary Amperex Technology (CATL) – a leading and world’s biggest battery maker that accounts for more than a third of global electric vehicle (EV) battery sales. CATL is also a supplier to US carmaker Tesla, Mercedes Benz and BMW in Europe and the company has ramped up capacity expansion this year to meet the rising demand.

Since CATL was established back in 2012, the EV sales have grown exponentially each year as a proportion of the overall global automobile sales. In 2021 alone, the penetration of EV sales as a percentage of the overall global automobile sales have hit 10% and by 2025, this number could triple (Source: Bloomberg New Energy Finance – as at 1 Jun 2022).

With an increasing global demand and calls for an electric vehicle and clean energy – specifically reiterated in the recent 20^th National Congress meeting for China to hit peak carbon emission before 2030 and carbon neutrality by 2060, I am strongly opined that CATL may be well positioned to take advantage of this rise in demand. The threat of other potential entrants is small as the power battery industry is an industry that requires high core technology capabilities and large investments. With the company spending a significant amount of capex each year on research and development (R&D), CATL can enhance its core capabilities and extend its lead on the market share over its other competitors like LG Energy Solution, BYD, Panasonic, SK on, Samsung SDI and others.

Performance Return of ChiNext

The performance of the global stock market (not just limited to ChiNext alone) has not been favourable to investors this year but if we take a slightly longer-term horizon of 5 to 10 years, it has done considerably well amid all the doom and gloom that are happening in the stock market today.

Source: Shenzhen Stock Exchange

x-axis: Period Date

y-axis: Price (CNY)

Conclusion

Readers of this blog will know that I am generally bullish on China theme stocks, especially now that the 20^th National Congress has all but confirm what they will be focusing on for the next 5 years.

While many of the recent situations in the news have not been favourable lately to the stock market, if we dissect down some of these cases, many of those are likely to be temporary in nature. If you believe in growth, you cannot ignore China.

I believe that the thematic nature and diversification benefit which the ChiNext Index provides will potentially prove to be a winning strategy in the mid to long term. Furthermore, the UOBAM Ping An ChiNext ETF offers investors with easy and convenient access to the ChiNext Index.

Gain access to the ChiNext Market, which is less accessible to foreign retail investors.
No minimum board lot size.
Dual trading currency denominations – SGD and USD.
Invest using cash and/or Supplementary Retirement Scheme (SRS) funds.
Excluded Investment Product

If you are interested to find out more about UOBAM Ping An ChiNext ETF, you can click here.

The ETF will be listed onto the Singapore Exchange (SGX) on the 14th November 2022 but the Initial Offering Period (IOP) has started and you may subscribe via any of the participating banks and dealers from now to 7 November 2022^.

*Available only from 21 October 2022, 9am to 3 November 2022, 12pm

^Please check with the respective Participating Dealers on their subscription closing dates.

Disclaimer: This article is written in partnership with UOB Asset Management (UOBAM), where 3Fs has received a small amount of compensation for writing the contents within.

Important Notice & Disclaimers:

This document is for general information only. It does not constitute an offer or solicitation to deal in units (“Units”) in the UOBAM Ping An ChiNext ETF (the “Fund”) or investment advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. The information contained in this document, including any data, projections and underlying assumptions, are based upon certain assumptions, management forecasts and analysis of information available and reflects prevailing conditions and the views of UOB Asset Management Ltd (“UOBAM”) as of the date of this document, all of which are subject to change at any time without notice. In preparing this document, UOBAM has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by UOBAM. While the information provided herein is believed to be reliable, UOBAM makes no representation or warranty whether express or implied, and accepts no responsibility or liability for its completeness or accuracy. Nothing in this document shall, under any circumstances constitute a continuing representation or give rise to any implication that there has not been or there will not be any change affecting the Fund. No representation or promise as to the performance of the Fund or the return on your investment is made. Past performance of the Fund or UOBAM and any past performance or prediction, projection or forecast of the economic trends or securities market are not necessarily indicative of the future or likely performance of the Fund or UOBAM. The value of Units and the income from them, if any, may fall as well as rise, and is likely to have high volatility due to the investment policies and/or portfolio management techniques employed by the Fund. Investments in Units involve risks, including the possible loss of the principal amount invested, and are not obligations of, deposits in, or guaranteed or insured by United Overseas Bank Limited (“UOB”), UOBAM, or any of their subsidiary, associate or affiliate (“UOB Group”) or distributors of the Fund. The Fund may use or invest in financial derivative instruments and you should be aware of the risks associated with investments in financial derivative instruments which are described in the Fund’s prospectus. The UOB Group may have interests in the Units and may also perform or seek to perform brokering and other investment or securities-related services for the Fund. Investors should note that the Fund is not like a conventional unit trust in that an investor cannot redeem his Units directly with UOBAM and can only do so through the participating dealers, either directly or through a stockbroker if his redemption amount satisfies a prescribed minimum that will be comparatively larger than that required for redemptions of units in a conventional unit trust. The list of participating dealers can be found at www.uobam.com.sg.

An investor may therefore only be able to realise the value of his Units by selling the Units on the Singapore Exchange Limited (“SGX”). Investors should also note that any listing and quotation of Units on the SGX does not guarantee a liquid market for the Units. An investment in unit trusts is subject to investment risks and foreign exchange risks, including the possible loss of the principal amount invested. Investors should read the Fund’s prospectus, which is available and may be obtained from UOBAM or any of its appointed agents or distributors, before deciding whether to subscribe for or purchase any Units. You may wish to seek advice from a financial adviser before making a commitment to invest in any Units, and in the event that you choose not to do so, you should consider carefully whether the Fund is suitable for you. The Fund is not in any way sponsored, endorsed, sold or promoted by and/or its affiliates and SGX and/or its affiliates make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the ChiNext Index (the “Index”) and/or the figure at which the Index stands at any particular time on any particular day or otherwise, The Index is administered, calculated and published by SGX. SGX shall not be liable (whether in negligence or otherwise) to any person for any error in the Fund and the Index and shall not be under any obligation to advise any person of any error therein. “SGX” is a trademark of SGX and is used by the Index under license. All intellectual property rights in the Index vest in SGX. Please note that, where relevant, the general disclaimers and jurisdiction specific disclaimers found on SGX’s website at http://www.sgx.com/terms-use are also incorporated into and applicable to this document/material.

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