Roundhill Unveils Tech-Focused China Dragons ETF

Roundhill Investments debuted China Dragons ETF (DRAG) on Thursday, giving investors equal exposure to nine of China’s biggest tech innovators.

The fund began trading on the Cboe BZX exchange with an expense ratio of 0.59%, according to a Roundhill press release announcing the fund.

DRAG targets a concentrated basket of five to 10 Chinese companies dubbed “China Dragons,” including tech giants Tencent, Alibaba and Baidu, the statement said.

The debut comes as Chinese stocks rallied after China’s central bank announced a stimulus package late last month to boost the country’s faltering economy. The People’s Bank of China initiative will lower the benchmark interest rate and reduce the amount of money banks must set aside for reserves as it aims to boost lending. It will also provide about $70 billion in loans to brokers, funds and other financial services organizations to buy Chinese stocks.

The 5.9 billion dollars iShares MSCI China ETF (MCHI) is up 35% in the past month, according to etf.com data.

Read more: ETFs in focus: MCHI rises after China’s stimulus package

“With China currently offering historically attractive valuations and the recent significant government stimulus package aimed at boosting its economy, DRAG offers investors a timely opportunity to gain targeted exposure to China’s top technology innovators” , Dave Mazza, CEO of Roundhill Investments, said in a press release. release.

DRAG holdings include Tencent, Alibaba

DRAG’s initial holdings include nine companies: Tencent, PDD Holdings, Alibaba, Meituan, BYD Company Limited, Xiaomi, JD.com, Baidu and NetEase, according to the fund’s fact sheet.

The fund uses an equal weighting strategy and will rebalance quarterly, Roundhill said.

DRAG enters a competitive landscape for China-focused ETFs with established funds such as the $7.4 billion KraneShares CSI China Internet ETF (KWEB) and the $5.5 billion iShares Trust – China Large-Cap ETF (FXI) generating 42.2% and 48.1% year-to-date gains, respectively.

Roundhill noted that DRAG is structured similarly to it Roundhill Magnificent Seven ETF (MAGS)which provides targeted exposure to top US technology stocks.

Read more: China ETFs ease after historic rally

The firm warned that DRAG risk includes potential economic and political instability as well as regulatory concerns for Chinese companies listed on US exchanges.

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