Lion-OCBC Securities Hang Seng TECH ETF vs Lion-OCBC Securities China Leaders ETF: Which Is Better?
Sudhan P●
The Lion-OCBC Securities Hang Seng TECH ETF and the Lion-OCBC Securities China Leaders ETF are two exchange-traded funds (ETFs) that give investors exposure to the growing China market.
The Lion-OCBC Securities China Leaders ETF is on track to be listed on the Singapore stock market early next month.
Its initial offering period is taking place from now till 28 July.
If you are wondering which ETF would make a better investment, here are some considerations.
Benchmark Index Comparison
As you may already know, equity ETFs track the performance of a specific benchmark index.
In the case of the Lion-OCBC Securities Hang Seng TECH ETF, it tracks the Hang Seng TECH index.
Meanwhile, the Lion-OCBC Securities China Leaders ETF tracks the Hang Seng Stock Connect China 80 index.
Here’s a table showing a comparison of the two indices:
| Hang Seng TECH index (tracked by Lion-OCBC Securities Hang Seng TECH ETF) | Hang Seng Stock Connect China 80 index (tracked by Lion-OCBC Securities China Leaders ETF) |
|||
|---|---|---|---|---|
| Objective | To represent the 30 biggest technology companies listed in Hong Kong that have high business exposure to at least one of the technology themes (internet (including mobile), fintech, cloud, e-commerce, or digital) | To measure the overall performance of the 80 largest Chinese companies in terms of market capitalisation listed in Hong Kong and/or mainland China that are eligible for Northbound or Southbound trading under the Stock Connect schemes | ||
| Weighting | Freefloat-adjusted market capitalisation weighted | |||
| Capping | 8% on individual securities | 8% on individual company; 40% on industry |
||
| Rebalancing Frequency | Quarterly | |||
| Fast Entry | A newly listed stock will be added to index if its full market capitalisation is within the top 10 of the existing constituents on its first trading day | No | ||
| Number of Holdings | 30 | 106 | ||
| Top 10 Constituents and Weighting | Constituent | Weighting | Constituent | Weighting |
| Xiaomi | 10.2% | Tencent | 7.3% | |
| Alibaba | 8.7% | Kweichow Moutai | 6.3% | |
| Meituan | 7.4% | Meituan | 5.4% | |
| Tencent | 7.3% | Ping An Insurance (Group) Company of China, Ltd. (SS) | 3.7% | |
| Sunny Optical Technology | 6.8% | China Construction Bank | 3.1% | |
| JD.com | 6.0% | Wuliangye Yibin | 3.1% | |
| JD Health | 5.6% | Ping An Bank | 2.7% | |
| Kuaishou Technology | 5.5% | Contemporary Amperex Technology | 2.5% | |
| Semiconductor Manufacturing International Corporation | 5.1% | Ping An Insurance (Group) Company of China, Ltd. (HK) | 2.3% | |
| Alibaba Health | 3.8% | Xiaomi | 2.2% | |
| Top 5 Sectors and Weighting | Sector | Weighting | Sector | Weighting |
| Information Technology | 71.0% | Financials | 31.2% | |
| Healthcare | 10.6% | Information Technology | 16.5% | |
| Consumer Discretionary | 8.5% | Consumer Staples | 15.4% | |
| Industrials | 8.5% | Consumer Discretionary | 9.4% | |
| Financials | 1.4% | Industrials | 8.2% | |
| Past Five-Year Index Performance | 118.1% | 65.3% | ||
One major difference between the two indices is the focus.
The Hang Seng TECH index, as the name might suggest, focuses on technology companies. As of 31 May 2021, the information technology sector made up 71% of the index.
On the other hand, the Hang Seng Stock Connect China 80 index doesn’t have a tech-heavy focus. Its biggest sector is financials at 31%.
Due to the strong performance of Chinese tech stocks, the Hang Seng TECH index’s performance over the past five years trounces that of the Hang Seng Stock Connect China 80 index.
However, compared to the Hang Seng index, which is the most widely used barometer of Hong Kong’s stock market, the Hang Seng Stock Connect China 80 index has performed better.
| Hang Seng TECH index | Hang Seng Stock Connect China 80 index | Hang Seng index | |
|---|---|---|---|
| Past Five-Year Index Performance | 118.08% | 65.31% | 23.75% |
(Note: All information for an index before its launch date is back-tested, and back-tested performance reflects hypothetical historical performance.)
ETF Comparison
We have seen the major differences between the indices tracking the Lion-OCBC Securities Hang Seng TECH ETF and the Lion-OCBC Securities China Leaders ETF.
Now, let’s compare the two ETFs specifically.
| Lion-OCBC Securities Hang Seng TECH ETF | Lion-OCBC Securities China Leaders ETF | |
|---|---|---|
| Classification Status | Excluded Investment Product | |
| Trading Currency | Singapore dollars (SGD) / United States dollars (USD) | Singapore dollars (SGD) / Renminbi (RMB) |
| Ticker Symbol | HST (SGD) / HSS (USD) | YYY (SGD) / YYR (RMB) |
| Trading Board Lot Size | 10 units | |
| Total Expense Ratio | Capped at 0.68% per annum for 2 years from the inception of the fund | Capped at 0.62% per annum for 2 years from the inception of the fund |
| Dividend Distribution | Currently no intention to distribute | Annual distribution at the discretion of the fund manager |
The good news is that the ETFs are very accessible.
Both ETFs are an Excluded Investment Product (EIP). Therefore, investors do not have to specifically qualify to trade it, unlike a Specified Investment Product (SIP).
They also trade in Singapore dollars, and their minimum trading lot sizes are small at 10 units each, unlike the standard lot size of 100 units.
However, in terms of total expense ratio, the Lion-OCBC Securities China Leaders ETF’s is slightly lower at 0.62% compared to its counterpart’s 0.68%.
The Lion-OCBC Securities China Leaders ETF also has a dividend distribution component, unlike the Lion-OCBC Securities Hang Seng TECH ETF.
So, Which ETF Should You Consider?
In my opinion, it all depends on your investment objective, time horizon, and risk appetite.
Assuming you are a young investor gunning for growth with many decades to go before retirement, the Lion-OCBC Securities Hang Seng TECH ETF might be a better choice.
This is due to the better prospects surrounding the tech industry over the long run.
Having said that, you must be able to stomach the volatility of the underlying index.
The Hang Seng TECH index has been on a volatile ride of late due to the increased scrutiny over Chinese tech companies.
Over the past six months, the TECH index has tumbled 25.3%, whereas the Stock Connect China 80 index has “only” fallen by 12.1%.
On the other hand, if you are nearing your retirement years or have already retired, the Lion-OCBC Securities China Leaders ETF might be a better choice.
The ETF provides some form of dividend income with more mature companies such as Kweichow Moutai, Ping An Insurance, and China Construction Bank.
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Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any stock. The writer owns units in Lion-OCBC Securities Hang Seng TECH ETF.
