THIS MATERIAL IS A MARKETING COMMUNICATION.
Global X China Innovator Active ETF Quarterly Review | Second Quarter Shines Light on Innovation
Innovation themes in solar, electric vehicles, software and automation came to light in the second quarter of 2021. However, online businesses became a major detractor as the Chinese government implemented regulatory changes in its latest industry-targeted crackdown.
China Reins in Tech Firms
China’s elevated regulation roll out continued to impact various industries, from education to technology. The latest crackdown on tutoring businesses, along with labor welfare issues for food delivery giant Meituan, spooked investors. China’s State Administration for Market Regulation’s (SAMR’s) decision to target internet businesses comes on the back of an unprecedented pace of regulatory tightening – as part of a broader drive to regulate China’s technology sector, which has seen unparalleled growth over the last few years. Against a regulatory-driven backdrop, Chinese companies are typically proactive when adhering to environmental, social and governance (ESG) measures. That said, some businesses expand so quickly that they face challenges meeting ESG best practices.
While the industry-wide impact led to a fall in sentiment towards internet stocks, the government continues to show its commitment to support new burgeoning industries such as electric vehicles (EVs), artificial intelligence (AI), solar and software.
The Electric Vehicle Revolution is Already Here
Global EV sales increased across the globe for Q2, in part due to a gradual pivot from traditional internal combustion engine (ICE) models, with total EV sales exceeding 10% over the same quarter.1 The figures we’ve seen emerge from the EV market were considered almost unimaginable a few years ago, and suggests to us that the EV revolution has already arrived.
As demand rises for EVs, so does the demand for the most crucial part of EVs – the battery. Leaders in the China battery supply chain, such as Contemporary Amperex Technology (CATL), BYD and Wuxi Lead Intelligent Equipment could continue their trajectory as long-term demand continues.
Over the quarter we focused on a growth theme, while remaining conservative about our exposure to more conventional businesses. Burgeoning industries in EVs, AI, solar and software continue to drive the supportive growth themes we’ve seen. While some investors may traditionally consider consumer businesses as a growth driver, there is no shortage of candidates in this sector.
By contrast, we have a meaningful exposure to information technology (IT) and the healthcare sector, as companies in this sector are likely to embrace new technology and meet societal demands, such building out an effective digital infrastructure for better health care in China.
We also have a sizable exposure to industrial sector. China’s global competitiveness and capabilities in manufacturing and engineering suggests to us these could become growth drivers for the sector.
Recently we added heavier weightings in biotech companies Jiangsu Hengrui Medicine and Innovent, which underperformed year to date.2 We reduced in solar names Longi New Energy and Xinyi Solar and EV company BYD, whose shares rallied over the second quarter. The change in our portfolio does not necessarily mean we’ve changed our views on those companies as they will remain as leaders in their respective sectors. We may be ready to re-enter these stocks if an opportunity presents itself i.e. through share pull backs.
Staying Ahead with Mirae Asset’s Latest Insights
1 JP Morgan, July 2021.
2 Bloomberg, July 2021.
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KIIDs”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KIIDs can be obtained from www.am.miraeasset.eu/fund-literature/ . The Prospectus is available in English, French, German, and Danish, while the KIIDs are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KIID before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary/.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Hong Kong: This document is intended for Hong Kong investors. Before making any investment decision to invest in the Fund, Investors should read the Fund’s Prospectus and the information for Hong Kong investors (of applicable) of the Fund for details and the risk factors. The individual and Mirae Asset Global Investments (Hong Kong) Limited may hold the individual securities mentioned. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Copyright 2022. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.