The realm of "hard technology" is experiencing an influx of investment, indicating a significant trend in the financial landscape. On February 17, a remarkable event unfolded as thirteen comprehensive exchange-traded funds (ETFs) focused on the STAR Market, or Sci-Tech Innovation Board, were simultaneously issued. Notably, the CICC STAR Market Comprehensive ETF achieved its fundraising goal of 2 billion units ahead of schedule, wrapping up its fundraising efforts earlier than the initially planned date of February 21.

Moreover, industry reports suggest that on the same day, the sales figures for several comprehensive STAR Market ETFs surpassed the mark of 500 million units. Investors are showing keen interest in these ETFs, particularly due to the performance of the STAR Composite Index, which serves as an innovative benchmark reflecting the dynamics of the market.

Analysts have pointed out that the STAR Composite Index exhibits high elasticity and a relatively balanced market capitalization distribution, making it an effective representative of the STAR Market. A significant portion of the index's constituent stocks includes companies recognized for being "specialized, sophisticated, and innovative," which not only embody the forefront of innovation on the STAR Market but also stand as the driving force behind China's industrial advancement and technological innovation.

Several industry experts emphasized during interviews that the STAR Composite Index ETFs will likely attract more capital to the "hard technology" sector, thereby becoming a vital tool for investors eager to capitalize on opportunities within the STAR Market.

The momentum was fueled by brokerage firms. On the same day, nine asset management companies, including Southern Asset Management, CICC, and Huaxia Fund, opened the sale of their STAR Composite ETFs. Additionally, Invesco Great Wall and other fund companies launched their offerings for the STAR Market ETFs, with even some newly approved ETFs choosing this date for their debut.

This strong showing by various fund companies has further invigorated sales channels. Reports from the market indicated that by that morning, the CICC STAR Market Comprehensive ETF had already hit its cap of 2 billion units. Multiple ETFs surpassed 500 million units in sales, with some even breaching the 1 billion mark, demonstrating the fervor among investors.

It's worth mentioning that during the successful rollout of the STAR Composite ETFs, brokerage channels played a crucial role. Prominent firms such as Guotai Junan, Huatai Securities, CITIC Securities, and China International Capital Corporation (CICC) were among those listed as cash sale agents for various STAR Market ETFs.

Moreover, the online distribution of these ETFs was facilitated through certified members of the Shanghai Stock Exchange, ensuring that a majority of the listed securities firms could participate in the ETF issuance process. “In our view, our products have been made available across various brokerages, with leading firms taking the lion's share in sales,” shared an industry insider.

The individual added that the primary avenues for new ETF issuances have largely been through brokerage firms, driven by factors such as customer matching, vested institutional interests, and the specialized capabilities of these brokers. Fund companies, on their part, also seem to be prioritizing the issuance of STAR Composite ETFs, preparing meticulously on both channels and investor outreach fronts.

For instance, prior to the product launch, CICC assembled a dedicated roadshow team for one-on-one discussions with multiple institutions. Furthermore, to enhance understanding of the allocation value of the STAR Composite Index among potential investors, CICC utilized various media such as posters, infographics, videos, and press releases to disseminate information effectively.

The competition around the issuance of STAR Composite ETFs remains intense. In addition to the twelve already open, the newly approved products include the Guotai STAR Market Comprehensive ETF, which is scheduled to debut on February 24, along with four additional products awaiting confirmation of their issuance dates.

One should note that the combination of fund companies clustering to launch these ETFs and brokers promoting the STAR Composite ETFs speaks to the importance of this index in filling a gap in the index market, as it provides a crucial mechanism for investors to reap the growth dividends offered by STAR Market enterprises.

Firstly, the STAR Composite Index and the STAR 50 each focus on different aspects, complementing each other to depict the operational conditions of the STAR Market from distinct perspectives. This index strikes a balance between representativeness and investability.

According to the Shanghai Stock Exchange, the STAR Composite Index is positioned as a comprehensive index covering approximately 97% of the total market capitalization, effectively embodying overall market representation while retaining some degree of investment functionality. In terms of market capitalization distribution, the index includes large, medium, and small-cap securities, with average and median capitalization figures virtually aligning with the overall STAR Market. Sectoral distribution is also fairly balanced, featuring a high concentration of stocks in industries such as semiconductors, power equipment, machinery, and pharmaceuticals, with semiconductors alone accounting for 38% of the weight.

Additionally, the STAR Composite Index encompasses a small- to mid-cap focus. According to data from the Industrial Securities Research Institute, stocks within the index that have a free float market capitalization between 10 billion Yuan to 40 billion Yuan are most prevalent, cumulatively comprising 27.20% of the total weight, while stocks below 2.5 billion Yuan account for the largest number at 305, representing around 16.56% of the total weight.

Furthermore, the index features a significant portion of companies recognized as "specialized, sophisticated, and innovative." As of January 20, 2025, statistics show that 361 constituent companies were identified as "specialized, sophisticated, and innovative," which accounts for an impressive 63.89% of the index. This proportion supersedes that of the STAR 50 Index at 46% and the STAR 100 Index at 50%.

According to analysts from the Industrial Securities Research Institute, the abundance of "specialized, sophisticated, and innovative" enterprises in the index not only indicates their sheer numbers but also their concentration in critical manufacturing sectors, especially in high-end manufacturing and intelligent manufacturing spheres like semiconductors, biomedicine, advanced equipment, new energy, and new materials.

Leading institutional players express optimism regarding the developmental prospects of the STAR Market constituent stocks. Zhang Ge, the proposed fund manager for the Tianhong STAR Composite Index ETF, highlighted that many STAR Market companies are projecting over a 15% year-on-year growth in R&D spending from 2023 to 2024. Additionally, preliminary revenue figures for the first three quarters of 2024 indicate significant growth, with some companies reporting their revenue doubling in 2023.

“This suggests that the entire sector is on a robust and correct growth trajectory. R&D-driven revenue growth showcases strong sustainability, aiding in the establishment of technological barriers and stable competitive advantages,” Zhang elaborated.

From an allocation perspective, Tom Digby, the regional head of ETF business development at Invesco, remarked that the current Chinese ETF market is recognized as one of the most vibrant and promising in the world, showcasing a plethora of innovative technology indices that introduce a wider array of investment tools. The STAR Composite Index nearly mirrors the entire stock offerings of the STAR Market, with a well-diversified sectoral spread, effectively reflecting the overall market performance. This index emphasizes tech-driven growth while maintaining flexibility and aggressiveness, while simultaneously mitigating risk exposure to any single industry—making it a crucial tool for capitalizing on investment opportunities in the STAR Market.

Digby believes that as the technological wave sweeps across the globe, investing in technology ETFs is increasingly being regarded as a preferred choice for numerous investors.

Furthermore, industry representatives from CICC noted that the issuance of STAR Composite Index ETFs enriches the array of investment tools available, emerging as one of the most highlighted products in the public fund industry this year.