Global X has released an exchange-traded fund (ETF) that focuses on the leading technology companies in the Chinese market, with the expectation the investment vehicle will attract $40 million in inflows in its first year.
The Global X China Tech ETF, which carries the Australian Securities Exchange ticker code DRGN, is a passively managed fund with a management fee of 0.45 per cent a year that tracks the Global X Tech 20 Index and has been created to deliver a pure-play exposure to technology stocks listed in China and Hong Kong.
Global X senior investment strategist Billy Leung said the 20-stock ETF would include Tencent, which owns social media platform WeChat, electric vehicle (EV) manufacturer BYD and e-commerce company Alibaba.
“DRGN is different from its peers as it avoids state-owned entities and financials, therefore it could be an attractive addition to both direct and institutional investors seeking direct, high-conviction allocation to China’s key growth industries without dilution from other markets,” Leung said.
“It offers exposure to industries, such as artificial intelligence (AI), automation and semiconductors, that are historically underrepresented in existing China-focused ETFs.
“Chinese tech companies cannot be underestimated. They aren’t speculative, rather they will be responsible for China’s shift toward self-sufficiency and are critical to the global technology ecosystem.”
He noted China-focused ETFs listed in Australia held about $470 million, while broader Asia-focused ETFs with exposure to China managed around $1.9 billion, and given the uptake of the Global X Artificial Intelligence ETF last year, the DRGN ETF was expected to resonate with investors.
“This launch is particularly timely as China’s market has been unloved over the last 24 months due to sentiment-driven concerns around regulation, geopolitics and macro growth. But beneath the surface, earnings visibility is improving, operational momentum is returning and strategic sectors like AI, EVs and semiconductors are beginning to scale, making this an inflection point for investors focused on fundamentals,” he said.