Nikko AM MSCI China EVs & Future Mobility ETF Preview: What Investors Need to Know
If you have been following the automobile scene, you would know that we are amidst a massive technological revolution.
I’m talking about the rise of Electric Vehicles (EVs).
Arguably this technological revolution is already taking off in China as according to Forbes:
China, home to the world’s auto market, is also the global leader in sales and production of electric vehicles.
Deliveries of electric vehicles more than doubled by 141% in October 2021 to 320,000 units, state-run China Daily said Saturday, citing China Passenger Car Association figures.
If you are interested in investing in the fast-growing China EV sector, this new EV Exchange Traded Fund (ETF) that will list in January next year in Singapore might interest you.
Here’s all you need to know!
TL;DR: Nikko AM: MSCI China Electric Vehicles & Future Mobility ETF Guide
- The MSCI China Electric Vehicles & Future Mobility ETF allows investors to participate in China’s growing EV sector.
- The ETF’s investment objective is to replicate the performance of the MSCI China All Shares IMI Future Mobility Top 50 Index.
- Some of the companies part of the index include Contemporary Amperex Technology Co. Limited (CATL), NIO, and Xpeng.
- The ETF will be an Excluded Investment Product (EIP).
- Local investors can also use their Supplementary Retirement Scheme (SRS) to invest in the ETF on top of the default cash option.
- The ETF will be listed on the Singapore Exchange (SGX: S68) today (20 January 2022).
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 investment product.
What’s the Nikko AM: MSCI China Electric Vehicles & Future Mobility ETF About?
|MSCI China Electric Vehicles & Future Mobility ETF|
|Instrument Type||Exchange Traded Fund (ETF)|
|Manager||Nikko Asset Management Asia Limited|
|Underlying Index||MSCI China All Shares IMI
Future Mobility Top 50 Index
|Index Provider||MSCI Inc.|
|Currency of Account (Base Currency)||Singapore Dollars (SGD)|
|Trading Currencies||Primary Currency: SGD
Secondary Currency: United State Dollars (USD)
|SGX Stock Code||EVS (SGD)
|Trading Board Lot Size||1 share|
|Total Expense Ratio||Capped at 0.70% p.a.|
|Dividend Distribution||SGD Share Class: Nil|
|Initial Offer Period||3 - 14 Jan 2022|
|Listing Date on SGX||20 January 2022|
|Investing Method||Cash & SRS|
So what are you actually investing in?
The MSCI China Electric Vehicles & Future Mobility ETF is an ETF constituted in Singapore that aims to replicate as closely as possible, before expenses, the performance of the MSCI China All Shares IMI Future Mobility Top 50 Index.
Nikko Asset Management (AM) has stated that the ETF is only suitable for investors who:
- Seek long term capital growth;
- Believe that the index will increase in value;
- Are willing and able to accept that their principal will be at risk;
- And seek an “index-based” approach to investing.
Speaking of indexes, the MSCI China All Shares IMI Future Mobility Top 50 Index captures large, mid and small market capitalisation companies across China A‐shares, B‐shares, H‐shares, Red‐chips, P‐chips and foreign listings (e.g. ADRs).
For context, here’s a quick explainer of the different share classes (via IndexUniverse):
|A-shares||Chinese companies incorporated on the mainland and traded in Shanghai or Shenzhen, quoted in RMB.|
|B-shares||Chinese companies incorporated on the mainland and traded in Shanghai and quoted in USD or traded in Shenzhen and quoted in HKD (open to foreign ownership).|
|H-shares||Chinese companies incorporated on the mainland and traded in Hong Kong.|
|Red chips||State-owned Chinese companies incorporated outside the mainland (mostly in Hong Kong) and traded in Hong Kong.|
|P-chips||Nonstate-owned Chinese companies incorporated outside the mainland, most often in certain foreign jurisdictions (Cayman Islands, Bermuda, etc.) and traded in Hong Kong.|
|N-shares||Chinese companies incorporated outside the mainland, most often in certain foreign jurisdictions, and U.S.-listed on the NYSE or Nasdaq
(ADRs of H-shares and red chips are also sometimes referred to as N-shares).
When investing in this ETF, you are tapping into the potential of China share classes listed in the US, Hong Kong, Shanghai and Shenzhen.
In terms of sector, the index includes the top 50 largest companies that are determined to derive significant revenues from business activities like:
- Electrochemical energy storage technologies
- Mining companies that produce metals used to manufacture batteries
- Autonomous vehicles and related technologies
- Electric vehicles (EVs) and EV components and materials
- New transportation methods, passenger and freight, including EVs, autonomous vehicles and shared mobility.
In addition, you should know that the index is reviewed twice a year in May and November to coincide with the May and November Semi-Annual Index Review of the MSCI China All Shares IMI Future Mobility Top 50 Index.
Once the review is completed, the changes will be implemented at the end of May and November, respectively.
MSCI has added that their methodology for the index’ aims to select only those securities that meet certain stock exchange trading, liquidity and size requirements, and caps securities within the index to a maximum weight of 10 per cent at each index review.’
In other words, MSCI will buy or sell assets to realign the weightings of the index to hit the stated target allocation.
Underneath the Hood of the MSCI China Electric Vehicles & Future Mobility ETF
Next, up let’s take a look under the hood of the MSCI China All Shares IMI Future Mobility Top 50 Index, which the ETF tracks.
The MSCI China All Shares IMI Future Mobility Index, which was launched on 6 October 2021, can be considered a distillation of the MSCI China All Shares IMI Index — a total market index that captures large, mid and small-cap representation across China A-shares, B‐shares, H‐shares, Red‐chips, and P‐chips.
In terms of performance, the data you see here is back-tested data (i.e. calculations of how the index might have performed over that time period had the index existed).
But MSCI has stated that there are typically material differences between back-tested performance and actual results.
As always, I would like to remind you that past performance is not indicative of future results.
In addition, here is more information about what companies make up the index:
As you can see, the index is heavily weighted towards Chinese companies involved in the EV sector.
The biggest constituent is actually Contemporary Amperex Technology Co. Limited (CATL).
For the uninitiated, the 2011 founded Chinese battery manufacturer and technology company primarily manufactures lithium-ion batteries for EVs.
The company also produces battery management systems as well as energy storage systems.
Risks of Investing in The MSCI China Electric Vehicles & Future Mobility ETF
Here are some of the risks of investing in this ETF you should be aware of:
- You are exposed to the liquidity risk
- You should be aware there is a minimum creation and redemption size
- Trading in Shares on SGX-ST may be suspended or even delisted
- You are exposed to tracking error risk
- The risk associated with the investment strategy of the Sub-Fund/Lack of discretion of Manager to adapt to market changes
- You are exposed to currency risk
- You are exposed to People’s Republic of China (PRC) market risk
- You are exposed to risks relating to investing in Autonomous and Electric Vehicle Companies
- You are exposed to risks associated with investing in Automobiles Industry
- You should be aware that your investment in the Sub-Fund may be exposed to other risks of an exceptional nature from time to time.
For more on the risks, please refer to the ETF’s Prospectus.
If you would like to learn more about investing in Chinese companies, I would urge you to catch our upcoming SeedlyTV episode that is happening live on Tuesday (14 December 2021) at 8pm.
How to Apply for the MSCI China Electric Vehicles & Future Mobility ETF?
Nikko AM has added that the MSCI China Electric Vehicles & Future Mobility ETF shares are Excluded Investment Products (EIPs) and prescribed capital markets products.
FYI: According to POEMS: EIPs are investment products that have terms and features that are generally understood by retail investors, and the classification of an EIP is determined by its complexity and not its risk level.
ETFs can fall under this category if the criteria are met.
Talking about EIPs, you can purchase this ETF using cash or SRS monies.
The initial offering period of this ETF will be from 3 – 14 January 2022:
Nikko AM has partnered with various placement agents that will offer this ETF:
- DBS Vickers
- iFast Financial
- iFast Global Markets
- Tiger Brokers
- UOB Kay Hian.
For now, the only information we have is that you can purchase this ETF using cash or SRS monies when it is listed on the Singapore Exchange on 20 January 2022.
Do note that you will need to pay brokers’ commissions, clearing fees and other fees associated with dealing on the SGX-ST.
If you are looking for a brokerage and want to save money on fees, you might want to check out our guide!
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