CNXT ETF: Question & Answer
14 December 2021
Read Time 6 MIN
China remains one of the world’s fastest growing economies. Its economy is undergoing a shift to focus more on consumer-driven, “new economy” sectors, and reduce its dependence on imports. This blog is intended to answer frequently asked questions about investing in China and VanEck ChiNext ETF (CNXT®).
- Why was CNXT’s index changed and what is the new index?
- What is the ChiNext Market and what types of companies are listed there?
- How can investors access these emerging industries?
- What companies are included in the ChiNext Index?
- How often is the index rebalanced?
- How does performance of the ChiNext Index compare to the SME-ChiNext 100 Index?
- How does the ChiNext Index compare to other Chinese benchmarks?
- How to buy VanEck ETFs?
Why was CNXT’s index changed and what is the new index?
Effective December 10, 2021 at the market close, CNXT’s index changed from the SME-ChiNext 100 Index to the ChiNext Index.
The previous index (SME-ChiNext 100 Index) included companies listed on two separate boards of the Shenzhen Stock Exchange: the SME Board and ChiNext Market. In February 2021, Chinese regulators approved the merger of the Main Board and the SME Board to simplify the overall structure of the stock exchange, resulting in two clearly differentiated listing venues: the Main Board and ChiNext Market. Since the SME board no longer exists, the change resulted in a partially stagnant initial universe as companies that IPO on the Main Board are not eligible for the old index. However, since the launch of CNXT in 2014, the ChiNext Market has grown in size and liquidity. We believe a ChiNext-only index may be attractive for investors seeking exposure to fast-growing, innovative onshore Chinese companies with a low weight to state-owned enterprises.
The new index is the ChiNext Index, which comprises the 100 largest and most liquid A-share stocks listed and trading on the ChiNext Market of the Shenzhen Stock Exchange.
What is the ChiNext Market and what types of companies are listed there?
According to the Shenzhen Stock Exchange, the ChiNext Market provides an important platform for implementing the national strategy of independent innovation by helping to accelerate the transformation of economic development and galvanize growth in emerging industries of strategic importance. As of November 11, 2021, there are 1,057 listed companies on the ChiNext Board.
Late 2020, China issued a plan to boost the development of the strategic emerging industries with its main goal to reduce its dependence on technology imports and instead to develop and rely on its own economy. The key industries mentioned were:
- New-generation information technology
- Biotech industry
- High-end equipment manufacturing
- New materials
- New energy industry
- Intelligent and new energy vehicles
- Energy saving and environmental protection
- Digital creative industry
How can investors access these emerging industries?
VanEck ChiNext ETF (CNXT) provides exposure to the 100 largest and most liquid China A-share stocks listed and trading on the ChiNext Market of the Shenzhen Stock Exchange. New economy sectors, such as information technology, consumer discretionary, consumer staples and health care, are well-represented in the fund's underlying index, with exposure primarily to privately owned SMEs.
What companies are included in the ChiNext Index?
All A-Shares listed on the ChiNext Market of the Shenzhen Stock Exchange are eligible. The top 100 names based on the daily average total market cap and daily average trading volume within the last six months are selected for inclusion.
ChiNext Index Top 10 Constituents:
| Name | Weight* | Description |
| Contemporary Amperex | 19.89 | Global leader of new energy innovative technologies, committed to providing premier solutions and services for new energy applications worldwide. Manufacturer specialized on lithium-ion batteries for electric vehicles and energy storage systems. |
| East Money | 7.23 | Engaged in the operation of internet financial service platforms. It includes brokerage, investment fund agency, financial advisory, investment consulting, asset management, margin financing and securities lending, among others. |
| EVE | 4.36 | Global lithium battery company which possesses core technologies and solutions for consumer, power, IoT and renewable applications. Its products are used in smart meters, remote control data acquisition systems, intelligent security, intelligent home, intelligent transportation, data storage and transmission, medical equipment, oil drilling and military applications. |
| Sungrow Power | 4.07 | The world’s most bankable inverter brand and leader of innovation in the solar industry. It is committed to providing clean power for all and is steadfast in its efforts to becoming the global leader of clean power conversion technology. |
| Mindray Bio-Medical | 3.98 | Global medical instrumentation developer, manufacturer involved in the sale, research and development of household products and medical equipment. It also develops, manufactures, markets, and sells electro-medical equipment in the patient monitoring, laboratory instrument, and medical ultrasound fields. |
| Inovance Technology | 2.82 | Leading global provider of industrial automation solutions. Its flexible production techniques and expert understanding of all industry sectors has allowed the company to establish globally leading industry-specific business units. |
| Walvax Biotechnology | 2.79 | Biotech company involved in the research, development, production and distribution of vaccines, monoclonal antibodies and blood products. |
| Aier | 2.54 | China's leading ophthalmology hospital group that covers Asia, Europe, and North America with huge scale and outstanding medical capacity. |
| Zhifei Biological | 2.39 | High-tech biological enterprise integrating the R&D, production, marketing, distribution as well as import and export of the production of vaccines for human use. |
| Lead Intelligent | 2.02 | World's leading manufacturer of new energy equipment. It mainly focus on seven industries, including Lithium-ion battery, Photovoltaic, 3C, warehouse & logistics system, automobile, fuel cell and laser. |
Source: Shenzhen Stock Exchange, FactSet. *As of 11/30/2021. Indices are not securities in which investments can be made.
How often is the index rebalanced?
The index is rebalanced semiannually, on the second Friday of June and December.
How does performance of the ChiNext Index compare to the SME-ChiNext 100 Index?
As of 11/30/2021, the ChiNext Index has outperformed the SME-ChiNext 100 Index since June 2010 on a cumulative basis, and over recent trailing periods. Note that the key difference between the two indices is the eligible universe covered by each, which is based on listing venue. The ChiNext Index is based on the 100 largest and most liquid A-share stocks of the ChiNext Market, which tends be large cap and some mid cap vs. the SME-ChiNext 100, which comprises SMEs (small and medium enterprises) of both the original SZSE SME and ChiNext markets.
ChiNext Index vs. SME-ChiNext 100 Index Returns
| Annualized Returns | ||||||
| YTD* | 1Y | 3Y | 5Y | 10Y | Since June 2010 | |
| ChiNext Index | 21.28% | 37.77% | 42.94% | 12.30% | 16.01% | 13.64% |
| SME-ChiNext 100 Index | 12.64% | 24.83% | 37.63% | 13.51% | 10.75% | 10.15% |
* Returns less than one year are not annualized.
Source: Bloomberg as of 11/30/2021. Indices are denominated in CNY and then translated into USD using Bloomberg FX. Past performance is not a guarantee of future results. Investors cannot invest directly in the Index.
How does the ChiNext Index compare to other Chinese benchmarks?
The ChiNext Index aims to reflect the performance of the ChiNext Market, which provides an important platform for implementing the national strategy of independent innovation by helping to accelerate the transformation of economic development and galvanize growth in emerging industries of strategic importance thus the higher allocation to Industrial, Healthcare and IT sectors. Broad based indices generally cover the entire investable market regardless of listing venue and may include both slower growth companies including a higher exposure to state owned enterprises, as well as higher growth companies that may not considered strategically important including those which have been the subject of regulatory scrutiny in China recently.
ChiNext Index Sector Breakdown vs Other Chinese Indices
| GICS Sector | ChiNext Index | SME-ChiNext 100 Index |
MSCI China Index | MSCI China A Index |
MSCI China All Shares Index |
| Industrials | 37.07 | 24.42 | 5.45 | 16.21 | 9.82 |
| Health Care | 24.77 | 16.45 | 7.57 | 10.35 | 8.68 |
| Information Technology | 19.83 | 27.32 | 6.94 | 14.43 | 9.99 |
| Financials | 7.86 | 8.42 | 13.75 | 18.39 | 15.16 |
| Materials | 4.32 | 6.80 | 3.15 | 10.13 | 6.33 |
| Consumer Staples | 3.32 | 7.73 | 5.39 | 16.52 | 9.45 |
| Consumer Discretionary | 0.58 | 5.27 | 31.53 | 6.99 | 21.82 |
| Utilities | - | 0.32 | 2.40 | 1.93 | 2.45 |
| Communication Services | 2.24 | 3.27 | 18.29 | 1.39 | 11.60 |
| Real Estate | - | - | 4.06 | 1.90 | 3.18 |
| Energy | - | - | 1.45 | 1.76 | 1.53 |
As of 11/30/2021.
Source: Shenzhen Stock Exchange and FactSet for ChiNext Index and SME-ChiNext 100 Index. MSCI for MSCI China Index, MSCI China A Index and MSCI China All Shares Index.
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