UOBAM Ping An ChiNext ETF: 8 Things You Need To Know When Investing In This China Focused ETF On SGX

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Gaining investment exposure to China is not something we should ignore. As the world’s second-largest economy – and poised for the top spot in the next decade – it will not be a stretch to say that China will play an increasingly important role in global financial markets.

China’s economy has also developed significantly in the past three to four decades. We can no longer simplistically label the country as “the factory of the world”. In fact, many of the biggest brands in the world, including Apple, Boeing, Nike, Standard Chartered, and Starbucks are already reaping significant revenue from selling to China’s growing domestic economy.

Furthermore, investors can gain a natural exposure to China’s economic development. In its latest 14^th Five-Year Plan (that China releases every 5 years), key themes that will be important to the Chinese government include sectors such as Technological Innovations, green energy and the well-being of its peoples.

One way Singapore investors can gain diversified access to the Chinese market is through the UOBAM Ping An ChiNext ETF – which will start trading on the Singapore Exchange (SGX) on 14 November 2022. This ETF enables investors to gain exposure to the ChiNext Index, which encompasses innovative growth companies from the sectors that may stand to be important for China.

The Initial Offering Period (IOP) has commenced, and investors can subscribe to units from now till 7 November 2022, via participating banks and dealers (more details on this below).

Here are 8 things you need to know before investing in it.

#1 What Is The UOBAM Ping An ChiNext ETF?

The UOBAM Ping An ChiNext ETF aims to replicate the performance of the ChiNext Index, before fees, costs and expenses. It does so by investing in the Ping An ChiNext ETF, which is the underlying fund that ultimately holds the investments.

As unit holders of the UOBAM Ping An ChiNext ETF, we gain exposure to A-shares, which are less accessible to foreign retail investors.

#2 What Is The ChiNext Market?

Formed in October 2009, there are over 1,200 companies listed on the ChiNext Market today. It is the secondary board of the Shenzhen Stock Exchange (SZSE), consisting of innovative and fast-growing enterprises.

Companies listed on the ChiNext are commonly known as China A-Shares. As mentioned, foreign retail investors have less access to A-shares. This is opposed to H-Shares, which are Chinese companies listed in Hong Kong or Chinese American Depositary Receipts (ADRs) listed in the U.S. – which foreign retail investors like us can invest in.

This is possible for Singapore investors as the UOBAM Ping An ChiNext ETF is the first ETF launched under a Memorandum of Understanding (MOU) signed by SGX and the Shenzhen Stock Exchange in December 2021. The MOU effectively allows Singapore (and Chinese) investors to access feeder ETFs listed locally on each other’s exchanges. In this case, the Ping An ChiNext ETF acts as the underlying ETF, bridging Singapore investors to the Chinese market.

#3 What Does Ping An Have To Do With This ETF Investment?

Many investors might be familiar with the Ping An name – a Chinese financial services group that is one of the largest in the world. But, what do they have to do with this ETF?

As explained the Ping An ChiNext ETF acts as the underlying ETF that bridges Singapore investors to the ChiNext Market. Listed on the Shenzhen Stock Exchange, Ping An ChiNext ETF is managed by Ping An Fund Management Company Limited.

Ping An Fund Management Company Limited itself is a member of one of the largest financial services companies in the world – Ping An Insurance (Group) Company of China – which has 225 million retail customers and 668 million internet users.

Source: UOB Asset Management

#4 What Are The Biggest Companies In The UOBAM Ping An ChiNext ETF?

When we invest in the UOBAM Ping An ChiNext ETF, we gain exposure to the top 100 largest and most liquid companies on the ChiNext Market. These companies are broadly diversified in various sectors as well.

Source: UOB Asset Management

The top 10 holdings include:

Most of the stocks on the above list are not household names in Singapore, but they are some of the innovative businesses within the ecosystem of new structural developments in China.

For example, CATL is one of the world’s largest Electric Vehicle (EV) battery makers, controlling nearly 50% of the market share. It counts major EV manufacturers such as Tesla, Mercedes-Benz, BMW, Volkswagen, Toyota, Honda and Hyundai as its customers.

Another company, East Money, is an online stock brokerage platform in China. As a beneficiary of the recent frenzied retail trading interest, its monthly active users on its stock app has grown to an estimated 11.4 million, while it has a further 10.9 million estimated monthly active users on its mutual fund app.

Within the healthcare sector, Mindray is a medical instrumentation manufacturer of 1) Patient Monitoring & Life Support, 2) In-Vitro Diagnostic Products, and 3) Medical Imaging Systems. These products can be found in healthcare facilities in over 190 countries and regions.

Other companies, such as Sungrow Power, operate in the clean energy sector and is a leader in energy storage systems; and Wens Foodstuffs Group operates in the livestock and poultry industry. One company that we may have more affiliation with is Yihai Kerry Arawana. Though not listed in the top 10 holdings, it is Wilmar’s Chinese subsidiary that IPO-ed on the ChiNext bourse in 2020.

#5 What Kind Of Returns Can You Expect On The UOBAM Ping An ChiNext ETF?

Investing in the UOBAM Ping An ChiNext ETF gives us exposure to innovative small and medium-cap companies in China. This may result in increased volatility. Nevertheless, we can reference how the Index has performed thus far.

In the rightmost part of the graph (below), we can see that the ChiNext Index has lost 26.1% of its value in the year-to-date 2022. Nevertheless, if we look slightly further back, we can also see the uptrend from 2019 – translating to a 43.7% return in the past 3-year period.

Source: Shenzhen Stock Exchange

(Graph depicts 4 years, from 2018 to 2022)

Furthermore, the ChiNext Index offers a low correlation to other major indexes that we may be invested in, including the Straits Times Index (STI), the S&P 500 Index and even the FTSE China A50 Index.

It can be used as a satellite allocation within our entire portfolio.

Source: UOB Asset Management

#6 What Is The Management Fee (And Other Costs) That You Need To Pay When Investing In The UOBAM ChiNext ETF?

There will be a management fee regardless of which ETF fund we invest in. For the UOBAM Ping An ChiNext ETF, it is currently 0.5% per annum (p.a.).

Additionally, we also have to consider the total expense ratio of up to 1.25% p.a when we invest in the fund.

#7 How Much Do We Need To Invest In The UOBAM Ping An ChiNext ETF During Its Initial Offer Period?

Units of the UOBAM Ping An ChiNext ETF will be offered in both Singapore Dollars (SGD) and U.S. Dollars (USD). This offers greater flexibility for our investment preference. For investors buying the SGD Class units, the initial offer price is S$1.0000.

Unlike many other counters listed on SGX, there is no minimum lot requirement for UOBAM Ping An ChiNext ETF – meaning we can buy just 1 unit if we wish to. While this lowers the investment barrier for investors, we also must factor in the brokerage and trading fees when trading in small lot sizes.

#8 How To Invest In The UOBAM Ping An ChiNext ETF?

The UOBAM Ping An ChiNext ETF will only start trading on SGX on 14 November 2022. For investors who want to subscribe to the ETF, here are the indicative key dates we need to take note of:

We can subscribe to units during the IOP via:

Participating Dealers^:

• CGS-CIMB Securities International Pte Ltd
• DBS Vickers Securities (Singapore) Pte Ltd
• Futu Singapore Pte Ltd (Moomoo)
• iFAST Financial Pte Ltd (FSMOne, iFAST Global Markets, iFAST Central, iFAST Prestige)
• Phillip Securities Pte Ltd
• Tiger Brokers (Singapore) Pte Ltd

^Please check with the respective Participating Dealers on their subscription closing dates.

Of course, we can also invest in the UOBAM Ping An ChiNext ETF by purchasing units via our stock brokerage platform post its listing date – starting from 14 November 2022. We can use both our cash and our Supplementary Retirement Scheme (SRS) funds to invest in the UOBAM Ping An ChiNext ETF.

Read Also: How The UOBAM Invest Robo-Advisor Is Different, And Why You Should Consider Investing In It (Even If You Are Using Other Platforms)

Important notes and disclaimers:

This document is for general information only. It does not constitute an offer or solicitation to deal in units (“Units”) in the UOBAM Ping An ChiNext ETF (the “Fund”) or investment advice or recommendation and was prepared without regard to the specific objectives, financial situation or needs of any particular person who may receive it. The information contained in this document, including any data, projections and underlying assumptions, are based upon certain assumptions, management forecasts and analysis of information available and reflects prevailing conditions and the views of UOB Asset Management Ltd (“UOBAM”) as of the date of this document, all of which are subject to change at any time without notice. In preparing this document, UOBAM has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was otherwise reviewed by UOBAM. While the information provided herein is believed to be reliable, UOBAM makes no representation or warranty whether express or implied, and accepts no responsibility or liability for its completeness or accuracy. Nothing in this document shall, under any circumstances constitute a continuing representation or give rise to any implication that there has not been or there will not be any change affecting the Fund. No representation or promise as to the performance of the Fund or the return on your investment is made. Past performance of the Fund or UOBAM and any past performance or prediction, projection or forecast of the economic trends or securities market are not necessarily indicative of the future or likely performance of the Fund or UOBAM. The value of Units and the income from them, if any, may fall as well as rise, and is likely to have high volatility due to the investment policies and/or portfolio management techniques employed by the Fund. Investments in Units involve risks, including the possible loss of the principal amount invested, and are not obligations of, deposits in, or guaranteed or insured by United Overseas Bank Limited (“UOB”), UOBAM, or any of their subsidiary, associate or affiliate (“UOB Group”) or distributors of the Fund. The Fund may use or invest in financial derivative instruments and you should be aware of the risks associated with investments in financial derivative instruments which are described in the Fund’s prospectus. The UOB Group may have interests in the Units and may also perform or seek to perform brokering and other investment or securities-related services for the Fund. Investors should note that the Fund is not like a conventional unit trust in that an investor cannot redeem his Units directly with UOBAM and can only do so through the participating dealers, either directly or through a stockbroker if his redemption amount satisfies a prescribed minimum that will be comparatively larger than that required for redemptions of units in a conventional unit trust. The list of participating dealers can be found at www.uobam.com.sg.

An investor may therefore only be able to realise the value of his Units by selling the Units on the Singapore Exchange Limited (“SGX”). Investors should also note that any listing and quotation of Units on the SGX does not guarantee a liquid market for the Units. An investment in unit trusts is subject to investment risks and foreign exchange risks, including the possible loss of the principal amount invested. Investors should read the Fund’s prospectus, which is available and may be obtained from UOBAM or any of its appointed agents or distributors, before deciding whether to subscribe for or purchase any Units. You may wish to seek advice from a financial adviser before making a commitment to invest in any Units, and in the event that you choose not to do so, you should consider carefully whether the Fund is suitable for you. The Fund is not in any way sponsored, endorsed, sold or promoted by and/or its affiliates and SGX and/or its affiliates make no warranty or representation whatsoever, expressly or impliedly, either as to the results to be obtained from the use of the ChiNext Index (the “Index”) and/or the figure at which the Index stands at any particular time on any particular day or otherwise, The Index is administered, calculated and published by SGX. SGX shall not be liable (whether in negligence or otherwise) to any person for any error in the Fund and the Index and shall not be under any obligation to advise any person of any error therein. “SGX” is a trademark of SGX and is used by the Index under license. All intellectual property rights in the Index vest in SGX. Please note that, where relevant, the general disclaimers and jurisdiction specific disclaimers found on SGX’s website at http://www.sgx.com/terms-use are also incorporated into and applicable to this document/material.

This publication has not been reviewed by the Monetary Authority of Singapore.