Global X launches China tech innovators fund

Exchange traded fund (ETF) specialist Global X has launched its newest ETF targeting listed technology innovators in China and Hong Kong.

The China Tech ETF (DRGN) is a passively managed fund tracking the Global X Tech 20 Index – a proprietary index providing pure-play exposure to the Chinese tech sector.

Based on Global X’s simulations, the Index has returned 8.0% to investors over the previous three years, and 7.1% in the year to date.

Among the most high-profile of the DRGN’s 20 holdings include diversified technology company Tencent (owner of social media and payments platform WeChat), making up 8.6% of the fund, electric vehicle manufacturer BYD (9.0%), and e-commerce giant Alibaba (7.8%).

Commenting on the launch of the new fund, Global X senior investment strategist Billy Leung noted the fund avoids investment in state-owned entities and financials, with exposure to industries such as AI, automation, and semiconductors that are “historically underrepresented in existing China-focused ETFs”.

This, he said, makes the DRGN “an attractive addition to both direct and institutional investors seeking direct, high-conviction allocation to China’s key growth industries without dilution from other markets.”

Leung recognised the deep foundations of China’s booming technology sector – a significant springboard for further innovation.

“China’s technology sector is built on decades of industrial expansion and infrastructure investment. This deep foundation has given rise to a vast innovation ecosystem from manufacturing to automation and AI.

“With the digital economy projected to exceed 55% of China’s GDP by 2030, we are only beginning to see the transformational impact on productivity across all sectors and help secure the country’s long-term competitiveness.”

Leung concedes that while China’s market has been “unloved over the last 24 months due to sentiment-driven concerns around regulation, geopolitics, and macro growth”, there are signs of recovery – even in the midst of a technical trade embargo with the US.

“[Earnings] visibility is improving, operational momentum is returning, and strategic sectors like AI, EVs, and semiconductors are beginning to scale making this an inflection point for investors focused on fundamentals.”

Global X said it expects DRGN to accumulate around $40 million over its first year of trade.

The DRGN attracts a management fee of 0.45% per annum.

The launch of the DRGN brings Global X’s 45 ETFs in market.