facebookLion-OCBC Securities Hang Seng TECH ETF vs Lion-OCBC Securities China Leaders ETF: Which One To Buy?

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Lion-OCBC Securities Hang Seng TECH ETF vs Lion-OCBC Securities China Leaders ETF: Which One To Buy?

profileSudhan 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.

Source: @news | Giphy

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)
ObjectiveTo 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
WeightingFreefloat-adjusted market capitalisation weighted
Capping8% on individual securities8% on individual company;
40% on industry
Rebalancing FrequencyQuarterly
Fast EntryA 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 dayNo
Number of Holdings30106
Top 10 Constituents and WeightingConstituentWeightingConstituentWeighting
Xiaomi10.2%Tencent 7.3%
Alibaba8.7%Kweichow Moutai 6.3%
Meituan7.4%Meituan5.4%
Tencent7.3%Ping An Insurance (Group) Company of China, Ltd. (SS) 3.7%
Sunny Optical Technology6.8%China Construction Bank3.1%
JD.com6.0%Wuliangye Yibin 3.1%
JD Health5.6%Ping An Bank2.7%
Kuaishou Technology5.5%Contemporary Amperex Technology2.5%
Semiconductor Manufacturing International Corporation5.1%Ping An Insurance (Group) Company of China, Ltd. (HK) 2.3%
Alibaba Health3.8%Xiaomi2.2%
Top 5 Sectors and WeightingSectorWeightingSectorWeighting
Information Technology71.0%Financials31.2%
Healthcare10.6%Information Technology16.5%
Consumer Discretionary8.5%Consumer Staples15.4%
Industrials8.5%Consumer Discretionary9.4%
Financials1.4%Industrials8.2%
Past Five-Year Index Performance118.1%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 indexHang Seng Stock Connect China 80 indexHang Seng index
Past Five-Year Index Performance118.08%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 ETFLion-OCBC Securities China Leaders ETF
Classification StatusExcluded Investment Product
Trading CurrencySingapore dollars (SGD) / United States dollars (USD)Singapore dollars (SGD) / Renminbi (RMB)
Ticker SymbolHST (SGD) / HSS (USD)YYY (SGD) / YYR (RMB)
Trading Board Lot Size10 units
Total Expense Ratio
Capped at 0.68% per annum for 2 years from the inception of the fundCapped at 0.62% per annum for 2 years from the inception of the fund
Dividend DistributionCurrently no intention to distributeAnnual 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 Buy?

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. 

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About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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