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.
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 4th 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.
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.
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 20th 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.
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)
Readers of this blog will know that I am generally bullish on China theme stocks, especially now that the 20th 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^.
UOB ATMs, internet banking and TMRW* | DBS ATMs, internet banking website and mobile banking interface* | OCBC ATMs and internet banking* | CGS-CIMB Securities^ | DBS Vickers Securities^ | iFast Financial^ | Moomoo SG^ | Phillip Securities^ | Tiger Brokers^
*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.
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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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