Edited by: Bi Luming
Another Chinese asset ETF is coming!
Amid a strong rally in China's stock market, a "China Dragon ETF" that tracks the performance of China's largest companies landed on the U.S. stock market.
The ETF, known as the Roundhill China Dragons ETF (symbol: DRAG), began trading on October 3 and plans to track 5-10 of the largest and most innovative Chinese technology companies, each with essentially the same allocation weight, and issuers collectively refer to these companies as "China Dragons."
The "China Dragon" ETF edged up 0.6% on the first day (3rd Eastern time) to close at $25.14, and rose 1.95% to close at $25.630 on the 4th.
Currently, the ETF constituents include Tencent, Pinduoduo, Alibaba, Meituan, BYD, Xiaomi, JD.com, Baidu, and NetEase. "DRAG is the first-ever ETF to offer precise exposure to China's tech giants," the issuer said. ”
Image source: Screenshot of Roundhill official website
The ETF's issuer, Roundhill Investments, is a United States Securities and Exchange Commission (SEC)-registered investment advisory firm focused on providing innovative ETFs. Among Roundhill's list of nearly 20 ETFs, the current top performer is the $780 million Roundhill Magnificent Seven ETF (MAGS), which tracks United States "Tech Seven" stocks and launched in April 2023. The Company views the ETF as the United States version of DRAG.
Image source: Screenshot of Roundhill official website
Image source: Screenshot of Roundhill official website
According to Roundhill Investments, the China Dragon ETF will invest in United States Depositary Receipts (ADRs) or derivatives of Chinese companies and rebalance them quarterly. As of the time of listing on the China Dragon ETF, these nine large-capitalization technology companies have collectively demonstrated competitive advantage through economies of scale, solid fundamentals and rapid growth over their peers.
According to several industry insiders, the constituents of the DRAG ETF have performed well, and these large-cap technology companies have economies of scale and solid financial performance, giving them a competitive advantage over their peers. Alibaba and Tencent, for example, are two giants in China's internet industry, and their strong user base and well-established ecosystem position them in an advantageous position to compete in the ongoing market. In contrast, Pinduoduo and Meituan have continued to innovate in the e-commerce and food delivery markets, expanding new market shares. In the global market, Xiaomi is one of the top three companies in the world in terms of smartphone shipments, and now it has entered the field of new energy vehicles and achieved good results.
Stimulated by a series of favorable policies, A-shares rebounded sharply at the end of September. At the same time, foreign institutions are bullish on China and China, saying that A-shares will outperform the entire emerging market, and at the same time are optimistic about the Hong Kong stock market, especially the high-dividend sectors where incremental buyback funds can be expected.
BofA Securities released a report on October 4 in response to eight questions from clients about Chinese assets, saying that a large amount of funds have recently poured into Chinese stocks in an attempt to seize the market ahead of the opening of A-shares, and it is not yet clear whether funds have filled the underweight gap. Funds are frantically scrambling, and some overseas Chinese ETFs have received more than 10 billion net purchases since September 24. BofA Securities recommends going long CSI 500 Index and CSI 1000 Index through swaps, or directly trading ETFs linked to CSI 300 overseas.
BlackRock's latest weekly report showed that it upgraded Chinese equities to "overweight" from "neutral". There is still room for moderate overweight to Chinese equities in the near short term, given the near-record discount of Chinese equities to developed market equities and the presence of catalysts that could spur investors to re-enter the market, according to the BlackRock Investment Institute.
Scott Rubner, managing director of Goldman Sachs Global Markets and strategist, said that China's stock market has been strong in recent days, with the Nasdaq China Golden Dragon Index soaring, and the Chinese stock market should become an important part of investors' investment plans.
According to the China Securities Journal, Morgan Stanley China Chief Equity Strategist Wang Ying said that policy support measures will help improve investor sentiment and liquidity, and promote a positive response in both onshore and offshore markets in the short term. A-shares are likely to outperform emerging markets as a whole.
Liu Peiqian, Asia economist at Fidelity International, said that the relevant major favorable policies introduced on September 24 have positively boosted the market and will improve market conditions in the short term.
The daily economic news synthesizes China Securities Journal and public information
Disclaimer: The content and data in this article are for reference only and do not constitute investment advice. Do so at your own risk.
National Business Daily