As 2023 draws to a close, the investment landscape in China has witnessed a significant surge in interest surrounding innovation-driven funds, particularly those focused on high-tech sectorsThe recent performance of the Huaxia 100 ETF, a member of this burgeoning market, has captured the attention of investors and analysts alike, highlighting the dynamics of this rapidly evolving financial segment.

By November 20, the Huaxia 100 ETF, identified by the trading code 588800, recorded a total asset size of approximately 39.55 billion yuan, a modest increase of 0.6 billion yuan from its initial offering of 38.95 billion yuanThis growth occurred within just three trading days of its launch, signaling robust market interest and investor confidence in the product.

This exceptional performance was not entirely unforeseen; during its initial phase, the Huaxia 100 ETF was dubbed the "capital-collecting king" among a batch of three new ETFs dedicated to the Science and Technology Innovation BoardIn fact, it comprised nearly 70% of the funds raised among this trioIts total fundraising amount has also surpassed all similar products released thus far, making it a frontrunner in the market.

As of mid-November, the total combined size of the initial four ETFs associated with the Science and Technology Innovation Board exceeded 155.61 billion yuan, reflecting over 120% growth since their debut figures of 69.5 billion yuanThis substantial increase illustrates a broader trend whereby investor capital is increasingly directed towards sectors that promise high growth—an aspect that the Huaxia 100 ETF is well-positioned to exploit.

Amid this upward momentum, analysts are eager to see what further milestones the Huaxia 100 ETF will achieve moving forwardData from Wind indicates that 2023 saw a decline of over 20% in both the number of public fund issuances and their corresponding share volumesNevertheless, the rise of the Huaxia 100 ETF has injected a revitalizing force into the fundraising market for funds, indicating a possible shift in investor sentiment towards innovative technologies.

The question on many investors’ minds is: what accounts for the immense popularity of the Huaxia 100 ETF? Much of this enthusiasm is rooted in the unique advantages presented by the underlying index, the Huaxia 100 Index, which serves as a benchmark for the ETF.

From an industry perspective, the Huaxia 100 Index symbolizes a newer wave of small-cap growth indices, following in the footsteps of its predecessor, the Huaxia 50 Index

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It keenly focuses on high-growth tech companies, combining "hard technology" with robust growth prospects—an ideal scenario for investment in an era where technological advancements drive economic progress.

Capital market participants have recognized the potential in this sector, as evidenced by the index which has endured over three years of correctionPredictions indicate a remarkable 47% compound annual growth rate in earnings over the past two yearsThis combination of extensive corrections and high growth potential suggests a compelling investment case for savvy investors.

The investment management perspective further elevates the Huaxia 100 ETF’s statusHuaxia Fund Management stands out within the ETF investment domain as a leader, with a remarkable track record of passive equities maintaining the largest market share for 17 consecutive yearsNotably, its Huaxia 50 ETF became the first in China to surpass one trillion yuan in shares.

At this juncture, the Huaxia 100 ETF represents another profound success for Huaxia Fund, following the footsteps of the Huaxia 50 ETFThe capacity for it to replicate the financial accomplishments seen in the Huaxia 50 ETF will remain a key focal point for investors in the long term.

The historical development of the Science and Technology Innovation Board has significant implications for the economyEstablished just over five years ago, it has been tasked with addressing the gaps in the high-tech sector through robust capital market supportThe board has expanded from an initial 25 companies to over 560 listed firms, collectively exceeding a market value of 6 trillion yuanThis board has become a hotspot for innovation, drawing talents from sectors such as renewable energy, new materials, biomedicine, high-end equipment manufacturing, and next-gen information technology.

Today, as China's economy transitions from rapid growth to high-quality development, technological innovation has been identified as a crucial engine for future growth

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The enterprises within the Science and Technology Innovation Board play a pivotal role in driving industrial upgrades and economic transformation, with their accrued innovation capabilities translating into tangible economic vitality and investment potential.

This growing emphasis on technology is evident as the Shanghai Stock Exchange launched the Huaxia 100 Index in July 2023. This index, unique in its focus on mid- and small-cap stocks within the Science and Technology Innovation Board, presents a scarcity of investment options compared to other indices that focus on larger market capitalization stocks.

With its components mainly composed of small-cap "hidden champions," the Huaxia 100 Index aggregates significant market forces behind innovation in technologyIn this index, 83 stocks have a circulating market value below 20 billion yuan, indicating that while these companies may be smaller in stature, they represent the backbone of burgeoning innovation in China.

Delving deeper into the sector distribution, healthcare and biotechnology, electrical equipment, electronics, and machinery industries dominate, accounting for significant weights of 30.56%, 17.94%, 18.63%, and 10.90% respectivelyThis diversified and balanced distribution underscores the index's representativeness of the Science and Technology Innovation Board as it navigates the high-growth landscape.

Comparatively, while other indices focus on large-cap insights like the Huaxia 50, the Huaxia 100 emphasizes a combination of hard technology and high growthCompanies featured in this index exhibit higher levels of research and development investment, symbolizing greater innovational vigorOver recent years, the median proportion of R&D expenditure relative to revenue among these component stocks has been approximately 11%. This figure, notably higher than the roughly 5% in the startup board and 4% in the broader A-share market, reinforces the significance of investing in these high-potential innovations.

Moreover, being at historical lows after several years of adjustment, the compound annual growth rate for predicted earnings has soared, presenting substantial investment opportunities

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With a strong expectation for “deep squat jumps,” the Huaxia 100 Index shows tremendous potential for appreciation.

Supportive policies have further fueled investors' passion for hard techThe regulatory landscape has imposed strong measures on share reduction, resulting in stricter governance on buybacks within the Science and Technology Innovation Board, with 82 companies engaged in repurchase activities—definitely creating a long-term favorable funding environment for innovation-driven firms.

Funding trends illustrate a marked increase in institutional capital directed toward the Huaxia 100 component stocks since the end of last yearBy the end of the second quarter of 2023, institutions held approximately 40.10% of these sharesComparatively, funds held around 14.47% of these components, correlating to significant shifts in ownership that signal increasing confidence in this investment arena.

In the grand narrative of fostering a technologically advanced nation, the Huaxia 100 Index presents considerable long-term value and growth potentialWith current low positioning ripe for an upswing, the alignment of institutional capital flows favors investment success—a foundational logic behind the rising interest in the Huaxia 100 ETF.

As the market begins to normalize, the demand for high-visibility products such as the Huaxia 100 ETF continues to soarNot only is it a top performer among its peer funds, but its relationship with the Huaxia 50 ETF elevates its status even furtherSince its inception, the ETF has been closely watched, boasting a scale that leads amongst its contemporaries.

Reflecting on the successes of the Huaxia 50 ETF—launched back in September 2020 with an initial fundraising of 400 billion yuan—the expectations for the Huaxia 100 ETF grew exponentiallyThe Huaxia 50 ETF has surpassed one trillion yuan in total assets, demonstrating excellent management and a comprehensive strategy—factors that the Huaxia 100 ETF seeks to leverage.

This anticipation reinforces the belief that in the diversified world of ETFs, investing in leading indices equates to investing with purpose

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