IMPORTANT: Investment involves risks. Investment value may rise or fall. Past performance information presented is not indicative of future performance. Investors should refer to the Prospectus and the Product Key Facts Statement for further details, including product features and risk factors. Investors should not base on this website alone to make investment decisions.

The CSOP China Healthcare Disruption Index ETF (the “Sub-Fund”) is a sub-fund of the CSOP ETF Series OFC (“Company”), which is a public umbrella open-ended fund company established under Hong Kong law with variable capital with limited liability and segregated liability between sub-funds. The Sub-Fund is a passively managed index tracking ETF authorised under Chapter 8.6 of the Code on Unit Trusts and Mutual Funds. The shares of the Sub-Fund (the “Shares”) are traded on the Stock Exchange of Hong Kong Limited (the “SEHK”) like stocks.

SFC registration and authorization do not represent a recommendation or endorsement of the Company or the Sub-Fund nor do they guarantee the commercial merits of the Company or the Sub-Fund or their performance. They do not mean the Company or the Sub-Fund is suitable for all investors nor do they represent an endorsement of its suitability for any particular investor or class of investors.

The Sub-Fund is a physical ETF and invests primarily in Hong Kong listed companies that have business operations in various innovative fields such as biotechnology and biopharmaceuticals in the healthcare sector in mainland China, Hong Kong, Taiwan and Macau. The Sub-Fund is denominated in HKD.

  • The Sub-Fund is not principal guaranteed and your investments may suffer losses. There is no assurance that the Sub-Fund will achieve its investment objective.
  • The Sub-Fund’s investment in equity securities is subject to general market risks, whose value may fluctuate due to various factors, such as changes in investment sentiment, political and economic conditions and issuer-specific factors.
  • Solactive China Healthcare Disruption Index (the “Index”) is a new index. The Sub-Fund may be riskier than other exchange traded funds tracking more established indices with longer operating history.
  • The investments of the Sub-Fund are concentrated in the disruption/innovative healthcare sector. The value of the Sub-Fund may be more volatile than that of a fund having a more diverse portfolio of investments and companies that adopt more traditional business models.
  • The economic prospects of the healthcare sector are generally subject to greater influences from governmental policies and regulations than those of many other industries. Certain health care companies may allocate greater than usual financial resources to research and product development and experience above-average price movements associated with the perceived prospects of success of the research and development programs. In addition, certain healthcare companies may be adversely affected by lack of commercial acceptance of a new product or process or by technological change and obsolescence.
  • Investing in companies in the innovative fields in the healthcare sector will subject to additional risks such as regulatory risks, financial risks and new business risks similar to the risks associated with biotech companies. Companies pursuing disruptive innovation may be less profitable at the outset and the Sub-Fund may suffer losses by investing in them.
  • All these may have an impact on the business and/or profitability of the healthcare companies in which the Sub-Fund invests and therefore may adversely affect the NAV of the Sub-Fund.
  • The investments of the Sub-Fund in the healthcare sector may include biotech companies. Biotech companies invest heavily in research and development which may not necessarily lead to commercially successful products, and the ability for biotech companies to obtain regulatory approval (for example, product approval) may be long and costly. In addition, the prospects of biotech companies may significantly be impacted by technological changes, increased governmental regulations and intense competition from competitors.
  • Many biotech companies are also dependent upon the ability to use and enforce intellectual property rights and patents, and any such impairment may have adverse financial consequences.
  • Biotech companies may incur net current liabilities which may expose the company to the risk of shortfalls in liquidity, prices may be more volatile than the overall market and would require the company to seek adequate financing such as external debt. Any difficulty or failure of a biotech company to meet its liquidity needs as and when needed may have a material adverse effect on its business, financial condition, results of operations and prospects.
  • Biotech companies invested by the Sub-Fund may be pre-revenue companies with limited track record or operating history, unlike other listed companies with longer track record or operating history. Pre-revenue companies refer to companies which have yet to generate any sales revenue typically because they do not have any products on the market yet. Pre-revenue companies are subject to a higher degree of risk generally and they have a higher risk of failure when compared to other companies. Valuations of pre-revenue companies are also subject to a high risk of being inaccurate. The Sub-Fund’s investments in these companies will be subject to higher investment risks.
  • Biotech companies may not be able to generate any profits during the development stage of its products or at all. Even if a biotech company is able to generate revenue in a short run, it may not become profitable on a sustainable basis or at all.
  • All these may have an impact on the business and/or profitability of the biotech companies in which the Sub-Fund invests and therefore may adversely affect the NAV of the Sub-Fund.
  • The investments of the Sub-Fund in the healthcare sector may also include pharmaceutical and medical devices companies. Pharmaceutical and medical devices companies are heavily dependent on patent protection. The expiration of patents may adversely affect the profitability of the companies. Many new products are subject to regulatory approval, the process of which can be long and costly and approved products are susceptible to obsolescence. Certain pharmaceutical and medical devices companies may allocate greater than usual financial resources to research and product development and experience above-average price movements associated with the perceived prospects of success of the research and development programs. Pharmaceutical and medical devices companies are also subject to heavy competitive forces that may make it difficult to raise prices. All these may have impact on the business and/or profitability of pharmaceutical and medical devices companies in which the Sub-Fund invests and therefore may adversely affect the NAV of the Sub-Fund.
  • The Index is subject to concentration risk as a result of tracking the performance of companies active in the innovative fields in the healthcare sector. This may result in greater volatility in the value of the Sub-Fund than more diverse portfolios which comprise broad-based investments.
  • The Index is subject to geographical concentration risks as a result of tracking the performance of primarily Hong Kong listed companies that have business operations in the field of healthcare sector in mainland China, Hong Kong, Taiwan and Macau. The value of the Sub-Fund may be more susceptible to adverse economic, political, policy, foreign exchange, liquidity, tax, legal or regulatory event affecting the Hong Kong market and places where these companies have business operations including mainland China, Taiwan and Macau.
  • Risks associated with FDIs include counterparty/credit risk, liquidity risk, valuation risk, volatility risk and over-the-counter transaction risk. FDIs are susceptible to price fluctuations and higher volatility, and may have large bid and offer spreads and no active secondary markets. The leverage element/component of an FDI can result in a loss significantly greater than the amount invested in the FDI by the Sub-Fund. Exposure to FDIs may lead to a high risk of significant loss by the Sub-Fund.
  • Securities lending transactions may involve the risk that the borrower may fail to return the securities lent out in a timely manner and the value of the collateral may fall below the value of the securities lent out.
  • Although the Manager will use its best endeavours to put in place arrangements so that at least one market maker will maintain a market for the Shares and that at least one market maker gives not less than 3 months’ notice prior to terminating market making arrangement under the relevant market maker agreement, liquidity in the market for the Shares may be adversely affected if there is no or only one market maker for the Shares. There is also no guarantee that any market making activity will be effective.
  • The Sub-Fund may be subject to tracking error risk, which is the risk that its performance may not track that of the Index exactly. This tracking error may result from the investment strategy used, and fees and expenses. The Manager will monitor and seek to manage such risk in minimising tracking error. There can be no assurance of exact or identical replication at any time of the performance of the Index.
  • The trading price of the Shares on the SEHK is driven by market factors such as the demand and supply of the Shares. Therefore, the Shares may trade at a substantial premium or discount to the Sub-Fund’s NAV.
  • As investors will pay certain charges (e.g. trading fees and brokerage fees) to buy or sell Shares on the SEHK, investors may pay more than the NAV per Share when buying Shares on the SEHK, and may receive less than the NAV per Share when selling Shares on the SEHK.
  • The Sub-Fund may be terminated early under certain circumstances, for example, where the Index is no longer available for benchmarking or if the size of the Sub-Fund falls below USD10,000,000 (or its equivalent in the Sub-Fund’s base currency). Investors may not be able to recover their investments and suffer a loss when the Sub-Fund is terminated.
  • Payment of dividends out of capital or effectively out of capital amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment. Any such distributions involving payment of dividends out of capital or effectively out of capital of the Sub-Fund may result in an immediate reduction of the NAV per Share of the Sub-Fund.
  • The Sub-Fund is passively managed and the manager will not have the discretion to adapt to market changes due to the inherent investment nature of the Sub-Fund. Falls in the index are expected to result in corresponding falls in the value of the Sub-Fund.
Please note that the above listed investment risks are not exhaustive and investors should read the Prospectus and the Product Key Facts Statement in detail before making any investment decision.

CSOP THEMATIC ETF SERIES

CSOP China
Healthcare Disruption
Index ETF



Brochure

Learn more
Exchange Ticker 3174.HK
Underlying Index Solactive China Healthcare Disruption Index1
Minimum Investment ~HKD7802
Management Fee 0.99%3
Inception Price per Share (Approx.) ~HKD7.802
Trading Lot 100 Shares
Listing Date 2021/07/21
  • "the Index"
  • Estimated data for reference only
  • Management fee includes custodian fee, registrar fee and administration fee. Please refer to the section headed “Fees and Charges” in Part 1 of the Prospectus for details.

Why Invest in the China Healthcare Industry?



Inelastic Demand Inelastic Demand
Policy Support Policy Support
Capital Support Capital Support
Inelastic Demand

Aging Population: a trend of the society


In China, the elderly over 60 years old made up 18.7% of total population as of 2020-end, which means almost one out of every five Chinese residents is an elderly person.



Aging Population:  a trend of the society



Source: National Bureau of Statistics of China

Policy Support
  • “Genomics and biotechnology” is among the seven frontier fields highlighted for further exploration in the 14th Five Year Plan, while “Biotech” is among the nine strategic emerging industries.

  • “Pharmaceutical industry” is the targeted high-tech fields in “Made in China 2025”.

DNA
China's pharmaceutical outsourcing CXO industry is thus developing rapidly.
Chinese traditional pharmaceutical companies accelerated Innovation and transformation, accompanied by the rise of biotech companies.
The average approval time for new drugs has been drastically shortened from 3-5 years to about 12 months.
The time from publicity to approval of innovative devices has been shortened from 2-3 years to less than 2 years, with the shortest being only 29 days.




Sources: National Bureau of Statistics of China

Capital Support

One of the Most Promising Sector with Growth Potential


Healthcare: One of the Favorite of Chinese PE/ VC in 2020


2020 China PE/VC Investment Sector Distribution (by Number of Transactions)



One of the Most Promising Sector with Growth Potential

Among healthcare sector, pharmaceuticals is the most popular sub sector.



425
No. of Transactions
137 billion USD
Traded value
32.24 million USD
Average value per transaction
42%

innovative drugs made up 42% of the pharmaceuticals sub sector




Sources: ChinaVenture, January 2021



18A Helps HK Biotech Sector Take Off


Chapter 18A Listing Rules is a fast track by HKEX introduced in 2018 for biotech companies in the pre-profit stage, allowing biotech companies that meet certain conditions with no income and no profits to be listed. Since the launch of Chapter 18A by HKEX in 2018, Hong Kong has become:


  • Asia's largest biotech fundraising center
  • World’s second largest biotech fundraising center

Looking forward to the next 5-10 years, Hong Kong is expected to become the world's largest biotech IPO fund-raising market.


18A allows investors to allocate in the company at early and cheap stage while drug R&D has received certain achievements , so as to better enjoy the huge profits and growth brought by future drug listing.


Biotech companies listed via Main Board Listing Rules - Chapter 18A, with the stock name ended with the market “-B” are included in the Southbound trading of Stock Connect since December 28, 2020.





Listed Companies through 18A since 2018



Listed Companies through 18A since 2018


Source: HKEX, Wind, as of 15 June 2021


Solactive China Healthcare Disruption Index

18A listed Company Annualized Return



Solactive China Healthcare Disruption Index 18A listed Company Annualized Return


Source: Bloomberg, based on firms’ average annualized return since IPO




Why Invest in CSOP China Healthcare Disruption Index ETF (3174.HK)?

Cover Four Disruption Directions in China Healthcare Industrial Chain

Four Disruption Directions in China Healthcare Industrial Chain



Source: Solactive, CSOP, as of 28 June 2021





Disruption 1: Innovative Drugs
The Driving Force of Industry Development



China Pharmaceutical Industry Focuses on Innovation and Transformation
R&D Expenditures In China Pharmaceutical Industry Are Rising Rapidly (Billion RMB)

R&D Expenditures In China Pharmaceutical Industry

Source: CDE, Wind, HTI

Huge Growth Room in the Future
The Market Size of China Innovative Drugs Market (Billion RMB)

The Market Size of China Innovative Drugs Market

Source: Citi Bank, November 2019; Pharma projects, Credit Suisse, October 2020









Disruption 2: Pharmaceutical Outsourcing (CXO)
Evergreen Trees in the Innovative Drug Industry Chain

CXO belongs to the upstream of innovative drug developers and provides outsourcing services for the development and production stages of new drugs. It is mainly classified into Contract Research Organization (CRO) and Contract Development and Manufacturing Organization (CDMO).



CXO have Stable Earnings


  • Regardless of whether the new drug can be listed successfully, continuous R&D expenditures can turn to the revenues of CXO companies.
  • After a new drug is successfully listed and commercialized, CXO can also benefit from manufacturing outsourcing.


The Revenues of CXO Companies Maintain High Growth (Million CNY)

The Revenues of CXO Companies

Source: CSOP, CICC Research, as of 28 June 2021. Company Announcement, Bloomberg, CSOP. The revenue of Genscript Biotech was adjusted based on the USD/CNY FX rate at the end of each year for comparison. Note: The IND (Investigational New Drug) is the means through which the sponsor technically obtains this exemption from the FDA; NDA: When the sponsor of a new drug believes that enough evidence on the drug's safety and effectiveness has been obtained to meet FDA's requirements for marketing approval, the sponsor submits to FDA a new drug application (NDA).

The Gross Margins of CXO Companies Maintain at the High Level

The Gross Margins of CXO Companies

Source: CSOP, CICC Research, as of 28 June 2021. Company Announcement, Bloomberg, CSOP. The revenue of Genscript Biotech was adjusted based on the USD/CNY FX rate at the end of each year for comparison. Note: The IND (Investigational New Drug) is the means through which the sponsor technically obtains this exemption from the FDA; NDA: When the sponsor of a new drug believes that enough evidence on the drug's safety and effectiveness has been obtained to meet FDA's requirements for marketing approval, the sponsor submits to FDA a new drug application (NDA).









Disruption 3: Innovative Device
Strong Demand of Popularization + Replacement



Compared with the drugs, medical devices account for small portion in the medical consumption of Chinese residents, which is far lower than the developed countries and the global average.


With the advancement of innovative technologies and the maturity of the industrial chain, medical device market benefit from the huge demand of "popularization + replacement", and their development prospects in China are very broad.



The Growth Rate of China Medical Device Market Far Exceeds the Global Market

The Growth Rate of China Medical Device Market

Source: EvaluateMedTech, Industrial Securities







Disruption 4: Internet Healthcare
Promising Market in China



Since 2017, the growth rate of online pharmaceutical sales has been increasing, with a year-on-year growth rate of 36.0% in 2019. With the removal of restrictions on online sales of prescription drugs in April 2021, the growth room in online retail sales has been larger.


Online access to medical insurance payment system has also effectively promoted the development of online consultation and drug purchase businesses. 14 provinces and the Beijing, Shanghai, Tianjin, and Chongqing regions in China have allowed online access to the medical insurance payment system. With more regions grant the online access to medical insurance, online consultations and drug purchases will develop rapidly.



iconOnline Sale of Prescription Drugs Brought Opportunities to E-pharmacy


China's Online Retail Pharmacy Market Size 2015-2030 (Forecast) & Proportion Of Prescription Drug Revenue

Online Sale of Prescription Drugs Brought Opportunities to E-pharmacy

Source: Frost & Sullivan, JD Health Prospectus; Data in Minei.com

iconRapid Growth of Online Consultation Services


Estimated Size of China's Online Medical Consultation Business

Estimated Size of China's Online Medical Consultation Business

Source: Industrial Securities, June 2021



Solactive China Healthcare Disruption Index






Underlying Index Information





Source: Solactive


HK Healthcare Sector Outperformed HSI and US Healthcare Sector



HK Healthcare Sector Outperformed HSI and US Healthcare Sector

Sources: Bloomberg, CSOP, 2019/11/29-2021/6/28。Sharpe Ratio assumes risk-free rate is 0. All information for an index prior to its launch date is back-tested. Back-tested performance reflects hypothetical historical performance. The hypothetical performance figure is for illustrative purpose only. Not indicative of actual future performance, which could differ substantially.


HK Healthcare Sector Outperformed HSI and US Healthcare Sector



HK Healthcare Sector Outperformed HSI and US Healthcare Sector

Sources: Bloomberg, CSOP, 2019/11/29-2021/6/28。Sharpe Ratio assumes risk-free rate is 0. All information for an index prior to its launch date is back-tested. Back-tested performance reflects hypothetical historical performance. The hypothetical performance figure is for illustrative purpose only. Not indicative of actual future performance, which could differ substantially.






Top 10 Holdings



Stock Code Name RBICS Subsector Disruption Area Index Weighting
6618.HK JD Health Health and Personal Care Retail Internet Healthcare 8.34%
2269.HK Wuxi Biologics Miscellaneous Healthcare CXO (CDMO) 8.10%
2359.HK WuXi AppTec Outsourced Development and Manufacturing Services CXO (CRO/CDMO) 8.08%
6160.HK BeiGene Non-System-Specific Biopharmaceuticals Biotechnology 7.94%
0241.HK Alibaba Health Health and Personal Care Retail Internet Healthcare 7.42%
3692.HK Hansoh Pharmaceutical Other Biopharmaceuticals Traditional Pharmaceutical 6.36%
6185.HK CanSino Biologics Non-System-Specific Biopharmaceuticals Biotechnology 4.95%
1177.HK Sino Biopharmaceutical Other Biopharmaceuticals Traditional Pharmaceutical 4.44%
1801.HK Innovent Biologics Non-System-Specific Biopharmaceuticals Biotechnology 4.13%
9688.HK Zai Lab Non-System-Specific Biopharmaceuticals Biotechnology 3.90%


Source: Solactive, CSOP, as of 28 June 2021


The Distribution of Disruption Areas in Solactive China Healthcare Disruption Index



The Distribution of  Disruption Areas in Solactive China Healthcare Disruption Index

Source: Solactive, CSOP, as of 28 June 2021

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