Posted inEquities

Hang Seng launches China new economy ETF

The fund is the first ETF tracking the Hang Seng China New Economy Index listed in Hong Kong.

The Hang Seng China New Economy Index ETF was listed on 11 November, after the Hong Kong Securities and Futures Commission (SFC) approved it earlier this week.

“The ‘new economy’ is often seen as the driving force of future economic growth which goes beyond the technology sector,” said Hang Seng Investment Management.

“We see this is a blossoming segment not only for now, but for years to come. Tracking this index will capture the long-term growth potential in the new economy sector.”

New economy sectors are not limited to digital and internet-related platforms, but also include investment opportunities across different industries ranging from healthcare, consumer related to new energy themes, the asset manager added.

Launched in September 2018, the Hang Seng China New Economy Index comprises the top 100 companies in terms of 12-month average total market capitalisation.

The components are Chinese companies listed in Hong Kong, mainland China or the US. There is also a 10% capping to avoid single company domination.

The index mainly comprises A shares (45.67%), followed by US-listed mainland companies (26.69%), and other Hong Kong-listed mainland companies (22.18%).

As of October 2021, 46.9% of the index is made up of firms in the information technology sector, with the top three constituent companies Tencent (9.77%), Alibaba (9.65%), and Meituan (6.08%).

The Hang Seng China New Economy Index has posted a 63.10% return over the last three years and has an annual volatility of 24.97%, according to the index factsheet.

By adopting a full replication strategy, the HSVM team believes it is the most transparent, viable and reliable approach.

The team also has the flexibility to utilise a representative sampling and optimisation strategy from time to time to achieve the investment objective when it is not feasible or cost-efficient to adopt a full replication strategy, HSVM added.

Apart from the ETF, the same team within Hang Seng also manages the passive Hang Seng China New Economy Index Fund, which was incepted in 2019.

“While the ETF is traded [on the Hong Kong stock exchange] and is accessible to institutional investors, the unlisted fund is more for wholesale distribution to the retail market,” said Hang Seng.

“The newly launched ETF can also prepare us for ETF connect and other initiatives within the capital markets.”

Part of Mark Allen.