Lion-OCBC Securities China Leaders ETF begins trading amid positive analyst outlook

Units of the ETF hit an intraday high of $2.029 before noon, up 1.5 per cent from its subscription price. ST PHOTO: KELVIN CHNG

SINGAPORE - The Lion-OCBC Securities China Leaders exchange-traded fund (ETF) began trading on the Singapore Exchange (SGX) on Monday (Aug 2) amid a rebound in Chinese stocks.

Units of the ETF hit an intraday high of $2.029 before noon, up 1.5 per cent from its subscription price, or $2, but closed the day unchanged, with more than 1.2 million units traded.

The listing comes on the back of Beijing's regulatory clampdown on the private education and technology sectors in China last week. The nation is also seeing a spike in the number of Covid-19 cases and signs of slowing economic growth. But analysts say there is potential for a longer-term upside.

The recent share price correction has brought valuations down to more attractive levels for long-term investors, said OCBC Securities managing director Wilson He.

"We are of the view that a healthy dose of regulations to protect consumer rights and prevent monopolistic behaviour will be positive for the affected industries."

He added that it is "highly unlikely" for the authorities to "over-regulate and suppress the innovations they are so keen to promote".

While investors should brace themselves for "greater volatility" in the short term, the clampdown could "create level playing fields, foster innovation, protect consumers, secure data and strengthen capital markets over the long run", he said.

Analysts from Citi Private Bank noted in an August report that despite locally listed China stocks having fallen by more than 30 per cent since hitting a high in February, the country is still at "the centre of the world's most rapidly growing region" and "simply cannot be ignored".

The Lion-OCBC Securities China Leaders ETF will track the Hang Seng Stock Connect China 80 Index, which comprises 80 large Chinese companies across 12 industries. These include information technology, consumer and financial companies. All three sectors make up more than two-thirds of the portfolio.

The ETF's largest constituents comprise Tencent Holdings, Kweichow Moutai, Meituan, Ping An Insurance and Contemporary Amperex Technology. It is Singapore's first China-focused ETF that will pay out annual dividends to investors and available in Singapore dollar and renminbi denominations.

The Lion-OCBC Securities China Leaders ETF is also the second ETF listed by Lion Global Investors and OCBC Securities.

In December last year, the two companies launched the Lion-OCBC Securities Hang Seng Tech ETF, which is made up of the top 30 technology companies listed in Hong Kong by market capitalisation.

Since then, the Lion-OCBC Securities Hang Seng Tech ETF has more than tripled its assets under management (AUM) to around $200 million, from $64 million when it first launched. Among the 18 equity ETFs currently listed in Singapore, it attracted the highest inflows in the first half of 2021.

The Lion-OCBC Securities China Leaders ETF opened with $83 million in AUM.

The SGX noted that retail demand for ETFs in Singapore via digital platforms has risen in the past year. As at June, retail investors contributed to a third of the $10 billion in ETF assets in Singapore, which is 70 per cent higher compared with a year ago, according to the exchange.

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