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Samsung Asset Management has unveiled the first thematic equity ETF in Hong Kong to target companies developing and utilizing blockchain technology.
The Samsung Blockchain Technologies ETF (3171 HK) has been listed on the Stock Exchange of Hong Kong in Hong Kong dollars.
A blockchain is essentially a network of computers that keep transactions secure in a decentralized database, or digital ledger, similar to a shared spreadsheet, that the network can see and must approve before it can be verified and recorded.
Once recorded, no one person can change it without the agreement of others, and it is nearly impossible to tamper with.
Blockchain underpins cryptocurrencies, like bitcoin, but it has many more uses and practical applications. The technology is able to streamline diverse business processes by moving data of any kind swiftly and securely while enhancing transparency and reducing the potential for fraud.
Commercial blockchain networks have already been established across multiple sectors including insurance, banking, real estate, trade financing, supply chain management, and shipping, and in many cases have now achieved scale.
The actively managed ETF selects its constituents from a universe of large and mid-cap stocks listed in both developed and emerging markets. Companies with insufficient liquidity will not be eligible for selection.
Samsung harnesses its proprietary research capabilities to seek out companies with significant exposure to the development or utilization of blockchain technologies.
Blockchain developers refer to companies that are actively engaged in the research and development, proof-of-concept testing, and implementation of blockchain technology.
Beneficiaries include companies that profit from the demand for blockchain applications such as in regards to transaction data, cryptocurrency, and supply chain data. This category also covers indirect beneficiaries such as firms benefitting from cost reductions and economies of scale through the implementation of blockchain technology within their businesses.
The ETF may also hold stock of blockchain investors, defined as companies that partner with or directly invest in companies that are actively engaged in the development or use of blockchain technology.
Constituents will be selected and weighted based on their level of alignment with the blockchain technology theme and the strength of their financial fundamentals such as price to earnings and potential revenue growth. Individual constituents will be capped at 10%.
The fund may also invest up to 10% of its assets in US-listed ETFs providing exposure to cryptocurrency futures contracts.
The ETF comes with an expense ratio of 0.85%.