Ten years ago, it is hard to imagine Chinese technology companies that could rival their US counterparts like Google, FaceBook, Amazon and Netflix. Now, the likes of Alibaba, Baidu and Tencent have dominated Mainland Chinese’s mammoth market. Against the backdrop of a US-China trade war, many of them have secondary listings in the Hong Kong stock exchange in recent years. Could this trend be a catalyst for Lion OCBC Securities Hang Seng Tech ETF?
If you believe in the long-term growth of Chinese technology industry, the Lion OCBC Securities Hang Seng Tech ETF may be an interesting offering. Lion Global Investors, the asset management arm of OCBC bank, is listing the Lion OCBC Securities Hang Seng Tech ETF. Launched in 20 July 2020, the Hang Seng Tech Index tracks the 30 largest technology companies listed in Hong Kong. The IPO period for Lion OCBC Securities Hang Seng Tech ETF is from 23 November to 7 December 2020.
For the uninitiated, exchange-traded fund is a passive investment in which a fund attempts to replicate the performance of the index in which it is tracking. In this case, the Lion OCBC Securities Hang Seng Tech ETF tracks the performance of Hang Seng Tech Index by investing in shares of companies listed in the index. Some of the companies included Alibaba Group, Xiaomi, Lenovo, Tencent, Ping An Healthcare and Technology Pte Ltd.
Broadly speaking, ETF is a type of collective investment scheme that pooled money from investors and invests according to the fund’s objective. Lion OCBC Securities Hang Seng Tech ETF is no exception. In a way, ETF is quite similar to unit trust. The key difference between unit trust and exchange traded fund is that the former is actively managed by professionals while the latter passively tracks a specified index. Because of this, ETFs are open-ended investment funds that are usually traded on a stock exchange.
Note that this is an opinion article and not meant to be a financial advice. Please do your due diligence or engage financial advisors before investing in the stock market. Furthermore, I am not vested in Lion OCBC Securities Hang Seng Tech ETF. Whether the unit price will surge or collapse has no impact on me. Thus, this article is not meant to induce readers to make any form of investment decisions.
Lion OCBC Securities Hang Seng Tech ETF worth the risk?
Since its launch, Hang Seng Tech Index rose from 6880 points to 7860 on 2 December 2020. This represented an increase of 14% in about six months. This is a pretty decent return in my opinion. Nonetheless, the rise had not been linear, with the index correcting to as low as 6770 since the July launch. What this means is that the Lion OCBC Securities Hang Seng Tech ETF could be volatile in its price movements despite the diversification of the underlying assets.
However, if you are able to hold for the long term, Lion OCBC Securities Hang Seng Tech ETF could be an interesting play as the index out-performed the Hang Seng Index on average in the past five years.
Source: Hang Seng Index
Source: Hang Seng Index
The key strategy of Lion OCBC Securities Hang Seng Tech ETF is to invest in a diversified basket of the 30 largest technology companies listed in Hong Kong. Many of these companies are actually Mainland Chinese companies. So this ETF is suitable for investors seeking an exposure to rapidly growing Chinese technology sector in a cost effective manner.
Cons and Risks
One thing to note is that Lion OCBC Securities Hang Seng Tech ETF may [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]
Not a member yet? You may sign up to become a member of SG Wealth Builder. The full benefits and privileges of SG Wealth Builder Membership:
- Access to the latest premium articles of SG Wealth Builder
- Email notifications of latest blog articles
- Participate in SG Wealth Builder campaigns
- Request for coverage on stocks, insurance and other personal financial topics
- Comment in articles and Wealth Forum
SG Wealth Builder Membership
You may sign up for the SG Wealth Builder Membership for only $15 per month. As a member, you can access all the articles, including the premium ones.
Note: After payment is made, you will be prompted with registration form to create your user-id and personal password.