OCBC Securities and LGI pick up awards for Lion-OCBC Securities Hang Seng TECH ETF

Brokerage firm OCBC Securi­ties has won the Investment Product Innovation of the Year Award from the Asian Bank­ing and Finance Retail Bank­ing Awards 2022 for the Lion-OCBC Securities Hang Seng TECH ETF, launched in 2020 with fund manag­er Lion Global Investors (LGI).

The latter separately picked up the Best ETF Manager Award by Insurance Asia News for 2022, with the fund manager saying it has “demonstrat­ed their expertise and focus in deliv­ering quality products to the market in a cost-efficient way.”

LGI, with OCBC Securities, launched three ETFs in 17 months from December 2020, including the Lion-OCBC Securities Hang Seng TECH ETF.

Exchange-traded funds, or ETFs, have been touted by many as a good entry point to the investing world for young or new investors. They prom­ise a diversified portfolio of stocks, low expense ratios — and for some — a decent dividend yield, all from buying a single stock.

OCBC Securities says that the Lion-OCBC Securities Hang Seng TECH ETF, listed on the Singa­pore Exchange (SGX), was award­ed as it could answer the demand for high-quality Hong Kong-listed tech-themed companies. The ETF also allows Singaporean investors to easily invest in Chinese technol­ogy companies that were tradition­ally difficult to enter.

LGI and OCBC Securities describe the Lion-OCBC Hang Seng TECH ETF launch as “a Marvel collaboration” where the two parties “brought to­gether different specialised skills that bring value to our customers.” LGI also says the ETF addresses the growing demand from investors for high-quality tech-themed companies and reflects the rising importance of the tech sector on the Hong Kong Stock Exchange.

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The Lion-OCBC Securities Hang Seng TECH ETF tracks the 30 larg­est tech-themed companies listed in Hong Kong, counting companies like Alibaba Group, Xiaomi Corp and JD.com as part of its compo­nent stocks. The newest addition is Chinese electric vehicle maker Nio, included in the ETF in June.

According to its fact sheet, the investment objective of the fund is to replicate as closely as possible, before expenses, the performance of the Hang Seng Tech Index. The fact sheet adds that as of June, 75% of its fund exposure is to companies in the IT sector, with healthcare be­ing the next largest sector at 6.5%. The industrials sector follows this at 6.4%, consumer discretionary at 5.4% and consumer cyclical at 5.1%.

Consumer discretionary describes goods and services considered non-es­sential but desirable if consumers’ available income is sufficient to purchase them. However, consum­er cyclical refers to stocks that rely heavily on the business cycle and economic conditions, like automo­tive, entertainment and retail.

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Since the ETF’s debut on Dec 10, 2020, at $1.378, it gained to $1.823 on Feb 17 last year before trending down for the better part of 2021 and thus far this year. It hit as low as 58.6 cents on Mar 15 before regaining some ground to close at 73.6 cents on Aug 29, almost half its IPO price. A large part of the decline is due to China’s crackdown on its tech sec­tor last year, which sent share pric­es of Tencent, Alibaba and Xiaomi into a steep correction.

Still, the ETF is one of the most popular funds among traders. The Lion-OCBC Securities Hang Seng TECH ETF is ranked the most active ETF on SGX by volume and among the top three by turnover in the first half of this year.

It also stands as the fourth largest equity ETF on the SGX, with OCBC Securities revealing that the ETF has assets under management (AUM) of $337 million as of June 30. This $337 million figure is 526.5% high­er than the $64 million of AUM it had when the ETF debuted on the SGX on Dec 10, 2020.

LGI and OCBC Securities remain positive on ETFs as a whole. They see ETFs as a good way for investors to gain exposure to an index with­out investing in all its component stocks. ETFs also allow investors to buy much smaller lot sizes of just ten shares at one time, making in­vesting in an ETF particularly attrac­tive to younger and newer investors.

Suppose one were to invest in Alibaba at its Aug 29 share price of about HK$95.15 ($16.98). The minimum board lot for its shares is 100, meaning one will need about HK$9,515 before fees and the cur­rency exchange to buy 100 shares.

But, suppose one were to buy into the Lion-OCBC Securities Hang Seng TECH ETF, in which Alibaba is a significant component stock. In that case, they are allowed to buy a minimum of 10 shares, which means only an outlay of $7.36 at its Aug 29 closing share price of 73.6 cents, before fees and with­out the volatility of the currency exchange.

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Furthermore, ETFs tend to have lower management fees than active­ly managed funds. The Lion-OCBC Securities Hang Seng TECH ETF’s management fees stand at 0.45% per year, and an expense ratio capped at 0.68% for the first two years.

ETFs also allow investors to fol­low the mantra of “not putting all your eggs in one basket,” enabling investors to buy stakes in their component companies all at once.

As ETFs also usually track and replicate their underlying instru­ments very closely, LGI and OCBC Securities say “it is one of the more popular ways of portfolio diversi­fication and risk management in times of high market uncertainties and volatilities.”