China has already set important milestones on the way to becoming the world industry and technology leader. This is especially the case for electric cars. Beijing identified the potential of alternative drives at an early stage, supporting the industry with enormous financial assistance. Although sales of e-cars by the market leader have declined this year due to coronavirus, the government is sticking by its ambitious target of having one quarter of newly licensed cars in China fitted with alternative drives by 2025. By comparison, in 2019 the figure was around five per cent. The plan is to be delivered with massive subsidies and a far-reaching expansion of charging infrastructure. This will be of particular benefit to the motor industry. Local giant BYD, the world's second largest e-car group after Tesla, is based in China. But the young start-up Nio, headquartered in Shanghai, has also since made a successful appearance on the market with its EC6, ES6 and ES8 models. Nio delivered 26,375 vehicles in the first nine months of the year alone, almost 114% more than in the same period last year. The company is now even planning to launch on the European market in 2021. For its part, domestic competitor Geely introduced its new "Zero Concept" car, at the most recent International Motor Show in Beijing. Boasting a formidable range of 700 kilometres, it is to come onto the market next year. Geely would also like to make this architecture available to other manufacturers. While Geely's share price has been treading water this year, BYD and Nio have accelerated strongly. The former has shot up some 350%, Nio more than 800%.
The three Chinese electric car manufacturers make up the Swissquote China’s Dragons Index together with 16 other innovative groups. Established around one year ago, the barometer focuses on Chinese companies which record the bulk of their sales in the ten sectors of the "Made in China 2025" strategy. This initiative, which came into being back in 2015, is nothing less than the precursor of the government's most recent plans to gain global technology leadership. To that end the country has selected ten key industries that it wants to drive forward: pioneering information technology, automated machine tools and robot technology, aviation and aerospace, maritime engineering and high-tech transport, modern railway equipment, autonomous and renewable energy-driven vehicles, power generation systems, agricultural machinery, new materials, biopharmaceuticals and cutting-edge medical devices. On the subject of health, the index includes CSPC Pharmaceutical Group, one of the leading pharmaceuticals group in China. The company, which concentrates on the research, manufacture and marketing of medicines as well as pharmaceutical products, announced in mid-October that it was also working on a potential drug to combat Covid-19.
Digitalisation winners such as the Chinese computer manufacturer Lenovo and Semiconductor Manufacturing, though, are also members of the Swissquote China’s Dragons Index. The latest technologies often go hand in hand with particular materials. This is where China Rare Earth Holdings has made a name for itself in recent decades: the group has an annual production capacity of 6,500 metric tons of rare earth products. Examples of the industrial applications of rare earth products include electronic high-tech devices, LCDs, DVDs, magnetic memory chips and many energy-saving, eco-friendly products. Also included in the barometer are trailblazing companies such as automation specialist HollySys. Founded as long ago as 1993, the company has so far delivered more than 30,000 projects for some 17,000 customers across a wide range of sectors. In Tencent, another broadly diversified internet giant is on board. Not only does it boast the largest music streaming platform in China, it also leads the world in the mobile games sector. Tencent is also growing enormously: analysts expect it to post an average annual rise in earnings of rather more than 20% between 2020 and 2022.
The Swissquote China’s Dragons Index has always been adequately diversified – the number of companies per sector is limited to five – and kept up to date through active management. Launched at the start of 2019, the tracker on the underlying offers investors the opportunity of a long-term investment in the rise of the Chinese sectors of the future. The potential candidates have to meet both quantitative and qualitative criteria. These include, for instance, a market capitalisation of at least USDmn 100 and an average daily trading volume of USD 100,000. The members of the index are reweighted regularly every three months. Denominated in US dollars, the certificate comes with a management fee of 0.7% p.a.. The track record speaks for itself: it has appreciated by around 14% since being launched. The certificate even reached a new record high recently.
Management Fee: 0.70% p.a.
Index Sponsor: Swissquote Bank SA
Issuer: Leonteq Securities AG
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