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CHNA ETF Rebalance – August 2019

Aug. 12, 2019

August 12th marked the semi-annual rebalance and reconstitution of the China BioPharma ETF’s (Nasdaq: CHNA) underlying index. This happens in a few steps.

STEP 1 A committee of advisors that oversees the index gets together and determines the reconstitution, which means they decide if any new companies should be added.

For the August meeting, the committee has added three new companies:

  • CanSino Biologics (HKEX: 6185)
  • Hansoh Pharmaceutical Group (HKEX: 3692)
  • Viva Biotech (HKEX: 1873)


These additions replace Ascletis Pharma (HKEX: 1672), Austar Lifesciences (HKEX: 6118) and China Grand Pharmaceutical and Healthcare (HKEX: 512), which at the time of the review did not meet the index’s minimum liquidity threshold. These companies will be eligible for re-inclusion during future semi-annual meetings.

STEP 2 Once the index’s holdings have been finalized, a rebalance occurs according to the index’s modified equal weighting methodology. Each constituent is weighted equally, subject to the following adjustments applied depending on a company’s market capitalization to emphasize the role of larger companies.


STEP 3 CHNA ETF then places trades to replicate those changes as closely as possible. Investors in the ETF do not need to take any action since these trades by the fund automatically update their exposure. View all holdings of the China BioPharma ETF.

As of the rebalance, the China BioPharma ETF will have 29 holdings going forward.


To help the fund’s investors and followers learn more about the companies that have been added, we have provided a brief background of their work and what sets them apart. The CHNA ETF is thrilled to welcome each of them to the fund.


CanSino Biologics (HKEX: 6185)

CanSino Biologics listed on the Hong Kong Stock Exchange (HKEX) under the exchange’s new biotech rule and began trading on March 28th, 2019. Headquartered in Beijing, CanSino is the first vaccine company to list on HKEX. Currently it has more than 15 vaccines under research and development, including ones designed to cover meningococcal diseases, pneumonia, diphtheria, shingles, tuberculosis, and Zika. In addition, the company’s Ebola vaccine, Ad5-EBOV, has been approved for commercialization by China’s National Medical Products Administration and is an example of how Chinese companies are trying to tackle global health problems.

Hansoh Pharmaceutical Group (HKEX: 3692)

By raising approximately $1 billion USD for its June 14th, 2019 debut on the Hong Kong Stock Exchange, Hansoh Pharma became one of the largest healthcare IPOs of 2019. The company already has approximately 50 approved medicines in China in six therapeutics areas (cancer, central nervous disease, anti-infective, diabetes, gastrointestinal, and cardiovascular). This makes it one of China’s largest pharmaceutical companies today. Hansoh has a pipeline of nearly 100 drug candidates in research and development. Six of these are category 1.1 medicines, which means they are innovative drugs containing new chemical entities that have not been marketed anywhere in the world.


Viva Biotech (HKEX: 1873)

Viva Biotech is a contract research organization, which means it helps other biotech and pharmaceutical companies discover and develop new medicines. Some of the services it offers includes target protein expression and structure research, hit screening, lead optimization and drug candidate determination. One thing that stands out about the company is its business model. In addition to accepting cash for these services, Viva also accepts equity stakes in the projects it works on as payment for its services if that is what the customer prefers. This means these projects can potentially create value for Viva shareholders. The company had 31 such equity stakes at the end of 2018 and hopes to have more than 100 by the end of 2021.

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Opinions expressed are those of the author or Funds and are subject to change, are not intended to be a forecast of future events, a guarantee of future results, nor investment advice. Fund holdings and allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security.

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The Loncar Cancer Immunotherapy Index is an index of 30 securities that have a strategic focus on the area of cancer immunotherapy, or harnessing the immune system to fight cancer. Quotes for the index can be found under the symbol “LCINDX” on the Bloomberg Professional service and other financial data providers. One may not directly invest in an index.

The Loncar China BioPharma Index is an index of 50 securities that have a strategic focus on advancing China’s biopharma industry. Quotes for the index can be found under the symbol “LCHINA” on the Bloomberg Professional service and other financial data providers. One may not directly invest in an index.

Holdings are subject to change.

The Hong Kong Stock Exchange (HKEX) is the primary stock exchange in the Hong Kong Special Administrative Region of China. Nasdaq is one of the primary stock exchanges in the United States.

Carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained at Read the prospectus carefully before investing.

Investing involves risk. Principal loss is possible. The fund may trade at a premium or discount to NAV. CNCR will invest in immunotherapy companies which are highly dependent on the development, procurement and marketing of drugs and the protection and exploitation of intellectual property rights. A company’s valuation can also be greatly affected if one of its products is proven or alleged to be unsafe, ineffective or unprofitable. The costs associated with developing new drugs can be significant, and the results are unpredictable. The process for obtaining regulatory approval by the U.S. Food and Drug Administration or other governmental regulatory authorities is long and costly and there can be no assurance that the necessary approvals with be obtained and maintained. The Fund may invest in foreign securities, which involve political, economic, currency risk, greater volatility, and differences in accounting methods. The Fund is non-diversified meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund. The Fund invests in smaller companies, which may have more limited liquidity and greater volatility compared to larger companies. The Fund is not actively managed and may be affected by a general decline in market segments related to the index. The fund invests in securities included in, or representative of securities included in, the index, regardless of their investment merits. The performance of the fund may diverge from that of the Index and may experience tracking error to a greater extent than a fund that seeks to replicate an index. Shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.

RISK FOR THE CHNA ETF: The biopharmaceutical industry in China is strictly regulated and changes in such regulations, including banning or limiting certain products, may have a material adverse effect on the operations, revenues, and profitability of Biopharma Companies. The laws and regulations applicable to the process of administrative approval of medicine and its production in China require entities producing biopharma products to comply strictly with certain standards and specifications promulgated by the government. Changes in currency exchange rates and the relative value of non-U.S. currencies will affect the value of the investment. Currency exchange rates can be very volatile and can change quickly and unpredictably. Investments in non-U.S. securities involve certain risks that may not be present with investments in U.S. securities. For example, investments in non-U.S. securities may be subject to risk of loss due to foreign currency fluctuations or to political or economic instability. Investments in non-U.S. securities also may be subject to withholding or other taxes and may be subject to additional trading, settlement, custodial, and operational risks. These and other factors can make investments in the Fund more volatile and potentially less liquid than other types of investments. To the extent the Fund invests a significant portion of its assets in the securities of companies of a single country or region, such as China, it is more likely to be impacted by events or conditions affecting that country or region. The Fund is a recently organized, non-diversified management investment company with no operating history. As a result, prospective investors have no track record or history on which to base their investment decision. The Fund is considered to be non-diversified, which means that it may invest more of its assets in the securities of a single issuer or a smaller number of issuers than if it were a diversified fund. The Fund is not actively managed and the Fund's sub-adviser would not sell shares of an equity security due to current or projected underperformance of a security, industry or sector, unless that security is removed from the Index or the selling of shares of that security is otherwise required upon a reconstitution of the Index in accordance with the Index methodology. To the extent the Fund invests more heavily in particular sectors of the economy, its performance will be especially sensitive to developments that significantly affect those sectors."

Diversification may not protect against market risk.

Exchange Traded Concepts, LLC serves as the investment advisor, and Vident Investment Advisory, LLC serves as a sub advisor to the fund. The Funds are distributed by Quasar Distributors, LLC, which is not affiliated with Exchange Traded Concepts, LLC or any of its affiliates.