A new Exchange-Traded Fund (ETF), the Roundhill China Dragons ETF (DRAG, Financial), has been launched to capture the performance of China's leading large-cap companies. The fund tracks an equal-weight basket of 5 to 10 of China's largest and most innovative tech companies, currently including Tencent (TCEHY), Pinduoduo (PDD), Alibaba (BABA), Meituan (MPNGY), BYD (BYDDY), Xiaomi (XIACY), JD.com (JD), Baidu (BIDU), and NetEase (NTES).
At market close, the ETF rose by 0.6%, ending at $25.14. According to Roundhill Investments, these nine leading tech companies showcased strong fundamentals and impressive growth advantages at launch, highlighting their economies of scale compared to peers. The ETF will undergo quarterly rebalancing.
Roundhill's CEO, Dave Mazza, pointed out that DRAG differs from other China-focused ETFs, such as the $7.9 billion KraneShares CSI China Internet ETF (KWEB) and the $6.4 billion iShares China Large-Cap ETF (FXI), due to its higher concentration.
This week saw $2.5 billion flow into the four largest China-related ETFs combined, with KraneShares’ KWEB witnessing its largest single-day inflow on record. This surge follows a series of economic stimulus measures from Beijing, propelling Chinese stocks to their best single-day performance since 2008. Fund managers and hedge funds are rushing into Chinese equities at unprecedented speeds after years of underinvestment.
Mohit Bajaj, Head of ETFs at WallachBeth Capital, noted a gradual return of funds to emerging markets. He suggested that if confidence in China's market remains strong, the DRAG ETF could perform well.
Among nearly 20 ETFs under Roundhill's portfolio, the standout performer is the $780 million Roundhill Magnificent Seven ETF (MAGS), tracking seven major U.S. tech stocks. Mazza considers MAGS the U.S. counterpart to DRAG, having risen 40% since its April 2023 launch.
