Lion-OCBC Securities Hang Seng Tech ETF is an ETF that I have been monitoring for some time. I have watched regrettably from the sidelines as its share price soared 35% swiftly above its IPO price despite listing less than 3 months ago. There was a slight correction in technology stocks in the beginning of March and I seized the small window of opportunity to finally initiate a position in it. For those who know me, I have always been bullish about China and have no doubts that China will be the future for my daughter’s generation. Heck, I even gave my daughter a single Chinese character (单名) for her name to provide some inkling that she could be from mainland China. China’s rise as a superpower simply cannot be ignored. To ensure that I have a small slice of the economic pie, I used my SRS funds to buy the Lion-OCBC Securities Hang Seng Tech ETF recently. Here is my review and the reasons why I chose to invest in the Lion-OCBC Securities HS Tech ETF.
1. AN ETF THAT REPLICATES THE HANG SENG TECH INDEX
We are all very familiar with the NASDAQ which is home to global technology companies such as Amazon, Alphabet, Apple and Facebook. These are companies that originated and headquartered in the US. The equivalent of these companies in the East can be found in the Hang Seng TECH Index, which represents the 30 largest technology companies listed in Hong Kong that have high business exposure to technology themes (Cloud, E-commerce, Digital, Internet, Fintech). These are exciting growth sectors to be exposed to as Covid-19 had accelerated the rapid adoption of new technologies ranging from payments, commerce to healthcare as shown in Diagram 1.
Diagram 1: Adoption of new technologies (Source: Lion-Global Investors)
An Exchange Traded Fund (‘ETF’) that replicates the Hang Seng Tech Index in full is the Lion-OCBC Securities Hang Seng Tech ETF. This is similar to STI ETF (SGX: ES3) that tracks that Straits Times Index in Singapore, which I had also used mySRS funds to investinin the past. Therefore, the Lion-OCBC Securities Hang Seng ETF becomes a good proxy for me to ride the growth of both China and technology.
2. BROADLY DIVERSIFIED
When Lion-OCBC Securities Hang Seng Tech ETF went IPO, the top 10 constituents were:
Diagram 2: Top 10 constituents of Lion-Global Hang Seng Tech ETF
However, this list is not static as rebalancing is done quarterly. It also imposes an 8% cap on individual constituent weighting. This ensures that no single stock has an outsized influence that cause unnecessary volatility.
I also like that Lion-OCBC Securities Hang Seng Tech ETF has a characteristic which waives the requirement for an IPO debutant to wait till quarterly rebalancing period before it gets included in the index. It is not uncommon for technology unicorns to soar 100-200% just a few months into their debuts. Therefore, the IPO Fast Entry, which allows qualified IPOs to be included into the Lion-OCBC Securities Hang Seng Tech ETF as early as its 10thtrading day, allows investors to promptly capture potential investment opportunities. Market chatter is that several China-based tech giants such as Pinduoduo, Trip.com, Baidu, IQIYI areseeking secondary listings on the HKEX. When they do eventually come back home, it is only going to increase the diversity and quality of the constituents.
3. EASILY ACCESSIBLE
The Lion-OCBC Hang Seng Tech ETF is listed on the SGX which is great as it is my home market which I am most familiar with. It is listed in dual trading currencies- both SGD and USD. I chose SGD as I wanted to remove the foreign exchange risk factor from the equation.
I mentioned earlier that I bought the Lion-OCBC Hang Seng Tech ETF with my SRS funds. For those that haveyet to start their SRS, fret not as this ETF can also be purchased via cash.
The trading lot size is a minimum of 10 units so ticket size starts from S$14. This makes it ideal for investors who do not have much investible funds. In comparison, buying 1 lot of all the component stocks would have caused in excess of $70,000.
An even more cost-efficient way to dollar cost average (‘DCA’) is to participate via OCBC Blue Chip Investment Plan. A monthly pre-determined amount can be deducted from your source of funds to be used to purchase the Lion-OCBC Hang Seng Tech ETF. The other advantage of the OCBC Blue Chip Investment Plan is that you will be able to automate this investment with your SRS funds if you have an SRS account opened with OCBC.
Another bonus is that the Lion-OCBC Securities Hang Seng Tech ETF is an Excluded Investment Product (EIP) which mean investors do not require any trading certifications.
Do note that the fund manager has no intention to distribute dividends at this moment, so this does not qualify as adividend stock.
In my opinion, all these factors make the Lion-OCBC Hang Seng Tech ETF highly accessible to retail investors and it has been quite well received judging from the reactions on forums.
4. FEES ARE OK BUT NOT THE CHEAPEST
I like to highlight that the total expense ratio of Lion-OCBC’s version of the Hang Seng Tech ETF is not the cheapest. When I compare it with the other 2 ETFs listed in the HKEX, its fee is sandwiched in the middle as shown in Diagram 3.
Diagram 3: Compare all-in expense ratio of Lion-OCBC Securities Hang Seng Tech ETF
In its prospectus, the Fund Manager has committed to cap its all-in expense ratio to 0.68% p.a. for at least 2 years from its inception. Despite it not being the cheapest, I was prepared to choose this over the rest for I am able to invest in my home currency and have it safe-kept under my CDP account.
CONCLUSION
I am the first to admit that I am not the best in picking technology stocks as it is not within my core competency. I find that the Lion-OCBC Securities Hang Seng Tech ETF is a good product for me to gain broad exposure to China’s economic growth and put the future of technology within reach.
Source: Heartland Boys
$Lion-OCBC Sec HSTECH S$(HST.SI)$
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