The dawn of the Year of the Snake has ushered in a fervent wave of technological enthusiasm within the A-share marketA fresh influx of funds is poised to invigorate the hard technology sectorRecent announcements reveal that the first batch of ETFs tracking the Science and Technology Innovation Index has officially launched, providing investors with an accessible tool for participating in this burgeoning market.

Since its inception in 2019, the Science and Technology Innovation Board (Sci-Tech Board) has carved out its niche by focusing on "three orientations": addressing global technological frontiers, responding to economic battlegrounds, and catering to major national needsThis positioning has made it a critical hub for "hard technology" that serves national strategic interests.

Today, the Sci-Tech Board is home to 585 listed companies with a market capitalization exceeding 7.22 trillion YuanThis platform has attracted a plethora of innovative companies possessing essential core technologies, acting as an important vehicle for capital market support in the development of new productive forces.

The Sci-Tech Board has been tasked with establishing China's stature as a hub for technological innovation in light of recent technological revolutions and a global race for technological supremacyIt is an era where core technologies, especially those embodied in artificial intelligence (AI), are rapidly advancing from lab to real-world applications, affecting various industries and permeating everyday life.

Simultaneously, the need for self-sufficiency in critical technologies has intensified due to pressures from global tech competition and supply chain security

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This urgency aligns with the overarching theme of achieving high-level technological sovereigntyWith groundbreaking developments, such as the advent of DeepSeek's AI technology, China is transitioning from a position of 'technological followership' to 'innovation leadership'. This shift is fostering a new consensus in the market regarding the strength of China's technological prowess.

Historically, every revolutionary wave in technology has catalyzed a fresh surge of innovations and created significant investment opportunitiesWe stand at the convergence of a new tech cycle characterized by an explosion of innovations in AI and widespread industrial applicationsWith the resonation of technological cycles globally, the Sci-Tech Board is poised to harness this current wave of technological innovation.

 

Through the lens of the Sci-Tech Board, we can observe not just sectoral growth but also the heightened potential for investment pursuits.

The Sci-Tech Board presents a pivotal opportunity for investors to capitalize on the growth of tech enterprisesHowever, due to the high technical thresholds of these companies and the volatility of individual stocks, choosing the right stocks can be challengingAs a result, the Sci-Tech Board aligns perfectly with index-style investingData from the Shanghai Stock Exchange indicates that by the end of 2024, the Sci-Tech Board will have achieved the highest proportion of index investments within the A-share market, with an aggregate scale surpassing 240 billion Yuan, accounting for 8.3% of its overall freely tradable market capitalization.

Previous offerings included the Sci-Tech 50, Sci-Tech 100, and Sci-Tech 200 indices; as the number of listed companies continues to grow, there arose a pressing need for a comprehensive index to observe the entire Sci-Tech Board

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This need culminated in the introduction of the comprehensive Sci-Tech Index.

The Sci-Tech Index is designed as a comprehensive measure of the Sci-Tech Board's market performance, utilizing a total market capitalization weighting system that incorporates a diverse array of stocks from large, medium, and small caps as well as red chip companies, while excluding ST and *ST stocksAs of February 11, the index comprises over 565 sample stocks, providing a remarkable coverage rate of 97% within the Sci-Tech Board's market capitalization.

Notably, this index features extensive industry coverage, including sectors like electronics, pharmaceuticals, machinery, computer technology, and power equipment and new energy, whose combined weight exceeds 88%. These sectors are rich in technological intensity, exhibiting significant growth potentials and high added value.

Moreover, the industry distribution among the Sci-Tech Index stocks is comparatively balanced, more diversified, and expansive than that of the Sci-Tech 50, Sci-Tech 100, and Sci-Tech 200 indicesBy engaging a varied array of large, medium, and small companies spanning the entire industry chain, the index has the potential to capture the shared growth benefits across different segmentsGiven the evolving nature of the Sci-Tech sector and considerable internal competition, the index also offers investors a means of mitigating the risks associated with stock price volatility.

The high research and development (R&D) intensity of the Sci-Tech Index is another compelling feature

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Data shows that the companies included in the index have consistently devoted substantial resources to R&D, with costs often representing a significantly greater proportion of revenue compared to other major comprehensive indicesThis reflects the 'hard technology' nature of the index and underscores the importance of ongoing R&D investment in maintaining the competitiveness of these emerging industries.

Many of these constituent stocks are situated at the forefront of rapidly growing tech fields, bolstered by high levels of technological input and demand, which points to strong future performance potentialProjections of net profit growth for constituents of the Sci-Tech Index depict strong anticipated gains, suggesting a significant growth trajectoryAs the Chinese economy is expected to see a fundamental recovery by 2025, the profitability of the Sci-Tech Index could also improve considerably.

 

The low fee structure of the newly released Huatai-Pinebridge Sci-Tech Index ETF further enhances its appeal.

The management fee for this ETF is set at 0.15% per year, while the custody fee stands at 0.05% per year—both among the lowest rates available for index funds currently on the marketThis low-cost structure not only reduces investment costs for investors but also enriches the overall holding experience.

Additionally, individual investors aiming to trade in Sci-Tech stocks directly are required to meet certain asset and trading experience qualificationsThe ETF format helps bridge this gap, allowing investors to sidestep the high entry barriers typically associated with the Sci-Tech Board

The combination of low thresholds, cost-effectiveness, and ease of trading makes the Huatai-Pinebridge Sci-Tech Index ETF an excellent fit for a diverse range of investors, catering to both retail and professional investors in their pursuit of opportunities.

Noteworthy is the fact that the Huatai-Pinebridge Sci-Tech Index ETF tracks the comprehensive Shanghai Sci-Tech Index, which considers dividend payments as part of its returns, classifying it as a total return index and focusing on the overall performance of its constituent securities, including dividend earnings.

As A-share companies increasingly recognize the value of dividends, the market's attention towards total return indices that encompass these benefits has noticeably intensifiedTotal return indices reflect changes in stock prices as well as returns from reinvested dividends, providing a holistic view of index performanceThe introduction of related ETFs satisfies the growing demand for diverse investment options in the market, enhancing investor choices while promoting a focus on long-term value investing, thereby emphasizing companies’ capabilities to deliver dividends and sustained profitability.

 

By amalgamating the "Sci-Tech Board Comprehensive Four," the Huatai-Pinebridge Sci-Tech Index ETF offers a fresh perspective and tools for investors seeking to explore and capitalize on opportunities within the Sci-Tech Board.

With the issuance and upcoming listing of the first ETFs tracking the Sci-Tech comprehensive index, we anticipate a surge of medium to long-term capital directed towards the Sci-Tech Board, thus enhancing its vibrancy

The Sci-Tech Index is likely to continue reaping the rewards of the burgeoning development of new productive forces and the tech wave.

The Huatai-Pinebridge Sci-Tech Index ETF adds a significant tool to the arsenal of Huatai-Pinebridge Fund following their previous releases, including the Sci-Tech Board ETF, Sci-Tech 100 ETF, and Sci-Tech 200 ETFNow, Huatai-Pinebridge has constructed a robust series known as the “Comprehensive Four of the Sci-Tech Board,” designed to empower investors to seize the technological investment opportunities accompanying the wave of innovation.

As the current excitement surrounding tech transformation continues to accelerate, the investment potential of the Sci-Tech Board may be further unleashedThe Huatai-Pinebridge Sci-Tech Index ETF (subscription code: 589993) is expected to emerge as a pivotal instrument for investors looking to embrace the winds of technological innovation at lower costs and reduced barriers.