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On 10 December 2020, the Lion-OCBC Securities Hang Seng TECH ETF (Stock Code: HST/HSS) was listed on the Singapore Exchange (SGX). As its name suggests, the ETF tracks the Hang Seng TECH Index’s performance, which comprises the 30 largest technology-related companies listed on the Stock Exchange of Hong Kong.
As an early indication of just how popular this ETF could be, the Initial Offering Period (IOP) for the Lion-OCBC Securities Hang Seng TECH ETF from 23 November 2020 to 7 December 2020 saw investors in Singapore subscribing to a total of 47.6 million units worth S$63.5 million being subscribed to.
For investors who did not subscribe to the IOP, you can still invest in the ETF since it’s now listed on the SGX. However, before you invest in the Lion-OCBC Securities Hang Seng TECH ETF, here are 5 things you need to know first.
#1 The Components Forming The Lion-OCBC Securities Hang Seng TECH ETF
The Lion-OCBC Securities Hang Seng TECH ETF is an index-based ETF. This means it seeks to replicate the performance of the index it’s tracking as closely as possible, which is the Hang Seng TECH Index.
As an investor, we should know the underlying companies that form the Hang Seng TECH Index. Ultimately, when we invest in an index-based ETF, we are investing in the underlying companies. For the Hang Seng TECH Index, it’s tech-related companies like Alibaba, Tencent, Xiaomi and JD.com that we will be investing into.
Source: OCBC Securities
The Hang Seng TECH Index represents the 30 largest technology companies listed in Hong Kong that have high business exposure to technology themes and pass the index’s screening criteria. Most of them are Information Technology companies but some of them are also enterprises from sectors such as Industrial and Healthcare that utilises technology to drive their business.
To ensure the ETF is not overly exposed to any particular company, the Lion-OCBC Securities Hang Seng TECH ETF has a mandate that ensures no particular company has a weightage of more than 8% within the ETF. This is rebalanced on a quarterly basis.
#2 Historical Performance Of The Hang Seng Tech Index
While the Hang Seng TECH Index may have only been launched on 27 July 2020, the companies that form the index have been around for a longer period. This makes it possible for us to track what the index’s historical returns could have been.
For example, had the index been launched at the start of the year, the year-to-date (YTD) return for it would have been 68.7% as of 4 December 2020, up from 4714.81 (31 December 2019) to 7,952.80 (4 December 2020). This should come as no surprise since many global technology companies have done well in 2020 despite the COVID-19 global pandemic.
While we need to be mindful that past performance should not be taken as an indicator for future performance, it tells us just how well the companies forming the Hang Seng TECH Index have performed in 2020.
Source: Hang Seng Tech Index
#3 First Technology-Based ETF Established On The SGX
Most of us will be glad to know that we now (finally) have a tech-focused ETF that we can invest in on the SGX. This is great because most investors would know by now that over the past decade, most of the fastest-growing companies around the world have been technology companies.
In addition, the good thing about the Lion-OCBC Securities Hang Seng TECH ETF is that it allows us exposure to large technology companies without having to open a local or overseas custodian account. This means we can hold the Lion-OCBC Securities Hang Seng TECH ETF directly in our CDP account.
#4 Not The Only ETF That Tracks The Hang Seng TECH Index
Since the Hang Seng TECH Index’s launch in July 2020, there have been a few ETFs that have been launched to track the index.
Based on our knowledge, there are currently four other ETFs (excluding the Lion-OCBC Securities Hang Seng TECH ETF) that tracks this index. These ETFs are all listed in Hong Kong. This means that as Singapore-based investors, we may incur additional custodian fees in holding these overseas investments and Customer Account Review (CAR) reviews may be required. The Lion-OCBC Securities Hang Seng TECH ETF on the other hand is an Excluded Investment Product (EIP) and does not require any specific trading certifications from investors.
While the Lion-OCBC Securities Hang Seng TECH ETF tracks an overseas index, it’s a local ETF. Besides being able to invest and hold the ETF units in our CDP account, the other advantage is that we can invest in the ETF in Singapore Dollar (SGD). This means that we don’t need to face unnecessary foreign exchange rate costs for our investments. However, we must note that the underlying investments are in a foreign currency and the businesses also sell their products in foreign currency – hence there will be an inherent foreign currency risk.
For those who prefer to invest via US Dollar (USD), the Lion-OCBC Securities Hang Seng TECH ETF is also traded in USD.
#5 Total Expense Ratio For The ETF
Last but certainly not least, one of the advantages of investing via ETF is cost. In this regard, the Lion-OCBC Securities Hang Seng TECH ETF doesn’t disappoint us with a total expense ratio of 0.68% p.a. This compares favourably with some of its overseas peers such as the CSOP HST INDEX ETF, which has a total expense ratio of 1.05% p.a.
To be clear, the Lion-OCBC Securities Hang Seng TECH ETF isn’t the cheapest ETF that you can invest in for the Hang Seng TECH Index since the iShares Hang Seng TECH ETF offered by BlackRock has an expense ratio of 0.25% p.a. However, this would require you to invest in Hong Kong Dollar (HKD) or US Dollar (USD) on the Stock Exchange of Hong Kong.
If you are keen to gain some exposure to the technology companies on the Hang Seng TECH Index, there are a few ways you can invest in the Lion-OCBC Securities Hang Seng TECH ETF.
As it’s already listed on the SGX, the easiest way to buy the ETF is through a local brokerage platform such as OCBC Securities that provides you access to the SGX.
Since the ETF is an EIP, you don’t need to pass the CAR review and can simply start trading it right away. With a minimum trading board lot size of just 10 units on the SGX, you can invest in this ETF with less than S$20 (Assumes NAV of the ETF is S$1.50 per unit and minimum trading lot size is 10 units on SGX, excluding fees and charges).
If you are looking to invest in larger amounts, OCBC Securities is also offering S$0 commission for all buy trades of 10,000 units or more in a single order. This promotion will run from now till 31 December 2020. Find out more about the promotion here.
For those who prefer dollar-cost averaging to avoid market timing risk, the Lion-OCBC Securities Hang Seng TECH ETF will also be available on the OCBC Blue Chip Investment Plan.
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This ETF is subjected to the following principal risks including but not limited to market risk, index sector risks, concentration risk, tracking error risk, foreign exchange risk and risk factors relating to the index. Some or all of the risks may adversely affect the Fund’s Net Asset Value, yield, total return and/or its ability to achieve its investment objective. You should note the risk factors associated with investing in the ETF. The statements in the prospectus are intended to be summaries of some of these risks. They are by no means exhaustive and they do not offer advice on the suitability of investing in the ETF. You should read the prospectus and carefully consider the risk factors described together with all of the other information included in the prospectus before deciding whether to invest in the ETF.
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