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.
Thank you for your interest in the China BioPharma ETF. Please be sure to sign up for email alerts below if you would like to receive notification of news, company interviews, and research that we publish from time to time.
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.