KB Securities announced on October 24 that it will newly list the "KB Huawei Value Chain Exchange-Traded Note (ETN)" and the "KB Leverage Huawei Value Chain ETN" on October 27. These products invest in 20 companies listed on the Shenzhen and Shanghai stock exchanges in mainland China that supply components, services, and technology to Huawei.
The Chinese stock market, which had been somewhat overlooked during the US market-driven rally, currently has a low valuation burden, and as a result, investor interest is gradually increasing. With the ongoing inflow of funds into the Chinese stock market, driven by the revitalization of domestic demand and structural liquidity expansion, the Chinese government is aiming to reduce its dependence on US-made artificial intelligence (AI) semiconductors and to pursue independence in the AI sector.
KB Securities explained that it launched the Huawei value chain products with the view that tech-related stocks will lead the Chinese market. The company is focusing on Huawei, which operates across a wide range of industries including telecommunications equipment, electronic devices such as smartphones, cloud and ICT, infrastructure, electric vehicles, and AI.
The underlying indices for the KB Huawei Value Chain ETN and the KB Leverage Huawei Value Chain ETN are the "Indxx China ICT Value Chain NTR Index" and the "Indxx China ICT Value Chain 2X Leveraged NTR Index," respectively. These products offer investors an indirect opportunity to invest in Huawei by investing in companies within the Huawei value chain ecosystem that have a high degree of association with Huawei, even though Huawei itself is an unlisted company. In the case of the leveraged product, it tracks twice the daily return of the underlying index, making it a leveraged investment tool for investors expecting short-term gains.
Additionally, both products are currency-exposed, meaning that in addition to stock price returns, fluctuations in the yuan exchange rate are also reflected in the product's performance. The annual management fee for these products is 0.00%, and the maturity is 10 years, allowing them to be traded until October 17, 2035, after which they will be delisted.
Kim Byunggu, Head of Passive Sales at KB Securities, stated, "Huawei is a representative global company that has achieved business diversification by focusing on advanced industries, but it has not been easy for general investors to access it until now. We expect that these Huawei value chain products will provide indirect investment opportunities." He added, "Going forward, KB Securities plans to continue developing a variety of China-themed products."
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