A batch of new Chinese tech-focused exchange traded funds (ETFs) were launched on Friday after winning rapid regulatory approval last weekend.
The ETFs will test investor appetite for chipmakers, producers of new materials and machine tool manufacturers at a time when tech shares have been hit hard, while rivalry between the US and China in the chip sector is intensifying.
The new funds appear to be a move to bolster tech stocks ahead of the Communist Party Congress next month. Regulatory filings suggest they were approved in just two days, compare weeks for other funds.
Two of the ETFs will invest money into the stocks of the 50 biggest chipmakers listed on Shanghai’s STAR Market, including Semiconductor Manufacturing International Corporation (SMIC) and Montage Technology Co.
Another new ETF will invest in high-end machine tool makers, such as Avic Aviation High-technology Co.
The ETFs’ fundraising, which end next Tuesday, comes amid a global sell-off in tech shares, as aggressive US monetary tightening – including another big interest rate hike by the Federal Reserve on Wednesday – dampens risk appetite.
It also comes amid heightened geopolitical tensions and tech rivalries between China and the United States.
The Biden administration took fresh steps in recent weeks to support domestic tech sectors and cut economic reliance on China, sending shares in Chinese biotech and new energy lower.
Vying for tech supremacy over China, the United States is seeking to “suppress China‘s technological advancement, and reshore the supply chain of high-tech industries that are critical to US national security,” Kaiwen Wang, China strategist at alternative asset management firm Clocktower Group, said.
Daisy Li, fund manager at EFG Asset Management, said “the whole world has shifted to security-centric from cost-centric,” adding the United States is aiming to revive its manufacturing industry.
They predicted more Sino-US tensions going forward. Shanghai’s tech-focused STAR Market – which Beijing hopes will fund China‘s tech self-sufficiency – has tumbled roughly 30% this year.
The lightening approval of the ETFs also comes as securities regulators have vowed to maintain market stability ahead of the 20th Party Congress, to be held from October 16.
- Reuters with additional editing by Jim Pollard