Roundhill Investments Launches China Dragons ETF (DRAG)

Rhea-AI Summary

Roundhill Investments has launched the Roundhill China Dragons ETF (DRAG) on Cboe BZX, offering targeted exposure to nine of China's largest and most innovative companies. DRAG provides equal-weight exposure to a concentrated basket of five to ten Chinese firms, dubbed the "China Dragons." As of October 3, 2024, these include Tencent, Pinduoduo, Alibaba, Meituan, BYD, Xiaomi, JD.com, Baidu, and NetEase.

DRAG is the only U.S.-listed ETF offering precise exposure to these top Chinese innovators, structured similarly to Roundhill's Magnificent Seven ETF (MAGS). The fund will rebalance quarterly and aims to capitalize on China's historically attractive valuations and recent government stimulus package. Roundhill's CEO, Dave Mazza, emphasizes DRAG's potential to capture growth as China enters a new phase of economic support and technological advancement.

Positive

• Unique ETF offering targeted exposure to top Chinese tech innovators
• Equal-weight strategy for balanced investment across 'China Dragons'
• Potential to capitalize on attractive Chinese market valuations
• Aligned with recent Chinese government economic stimulus efforts

Negative

• Concentrated portfolio increases risk compared to broader-based China ETFs
• Quarterly rebalancing may lead to higher turnover and potential tax implications

Insights

ETF Analyst

The launch of Roundhill's China Dragons ETF (DRAG) represents a significant development in the ETF landscape, offering investors a unique way to access China's tech giants. This concentrated ETF focuses on 9 major Chinese companies, providing a more targeted exposure compared to broader China ETFs.

Key points to consider:

• Equal-weight strategy with quarterly rebalancing, potentially reducing single-stock risk
• Includes major players like Tencent, Alibaba and Baidu, capturing China's tech innovation leaders
• Launches amid historically low valuations for Chinese stocks and recent government stimulus
• Follows the success of Roundhill's Magnificent Seven ETF (MAGS), suggesting potential investor interest

While DRAG offers a novel approach to Chinese tech exposure, investors should be aware of the concentrated nature of the fund and the regulatory risks associated with Chinese stocks. The ETF's performance will be closely tied to China's economic recovery and the global competitiveness of these "Dragon" companies.

Market Research Analyst

The launch of DRAG comes at an intriguing time for Chinese equities. With valuations at historic lows and recent government stimulus, there's potential for a market rebound. However, several factors warrant careful consideration:

• Geopolitical tensions and regulatory uncertainties continue to impact Chinese tech stocks
• The concentrated nature of DRAG (9 holdings) may lead to higher volatility compared to diversified China ETFs
• Equal-weighting could potentially outperform cap-weighted strategies if smaller companies in the index outperform
• Investor sentiment towards Chinese equities remains cautious, which could affect demand for DRAG

The success of DRAG will likely depend on China's economic recovery trajectory and the global competitive position of these companies. While it offers a unique investment proposition, investors should weigh the potential growth opportunities against the inherent risks of a concentrated, single-country tech ETF.

DRAG offers targeted exposure to nine of the largest and most innovative Chinese companies, collectively known as the "China Dragons."

NEW YORK, Oct. 3, 2024 /PRNewswire/ -- Roundhill Investments, an ETF sponsor focused on innovative financial products, is pleased to announce the launch of the Roundhill China Dragons ETF (DRAG), which begins trading on Cboe BZX today.

DRAG seeks to provide investors with equal-weight exposure to a concentrated basket of five to ten of the largest and most innovative Chinese companies driving innovation around the globe, collectively dubbed the "China Dragons." As of October 3, 2024, the nine China Dragons include Tencent, Pinduoduo, Alibaba, Meituan, BYD, Xiaomi, JD.com, Baidu, and NetEase.

Unlike existing China ETFs that may offer broad-based exposures, DRAG is the only U.S.-listed ETF offering precise exposure to the largest and most innovative Chinese companies. DRAG is structured similarly to the Roundhill Magnificent Seven ETF (MAGS), which investors and traders have embraced for its targeted exposure to seven leading U.S. stocks. DRAG will implement an equal weight strategy, rebalanced on a quarterly basis.

"With China currently offering historically attractive valuations and the recent significant government stimulus package aimed at boosting its economy, DRAG provides investors with a timely opportunity to gain targeted exposure to China's top tech innovators," said Dave Mazza, Chief Executive Officer at Roundhill Investments. "These companies are not only industry leaders in China but are also playing a crucial role in driving global innovation. DRAG offers a focused and efficient way for investors to capture the growth potential of these market leaders as China embarks on a new phase of economic support and technological advancement."

For more information on the Roundhill China Dragons ETF (DRAG) and current holdings, please visit our website.

About Roundhill Investments:

Founded in 2018, Roundhill Investments is an SEC-registered investment advisor focused on innovative exchange-traded funds. Roundhill's suite of ETFs offers distinct and differentiated exposures across thematic equity, options income, and trading vehicles. Roundhill offers a depth of ETF knowledge and experience, as the team has collectively launched more than 100+ ETFs including several first-to-market products. To learn more about the company, please visit roundhillinvestments.com.

Investors should consider the investment objectives, risks, charges, and expenses carefully before investing. For a prospectus or summary prospectus, if available, with this and other information about the Fund, please call 1-855-561-5728 or visit our website at https://www.roundhillinvestments.com/etf/DRAG. Read the prospectus or summary prospectus carefully before investing.

China Risk. The Fund's significant investments in instruments that provide exposure to Chinese companies subject the Fund to risks specific to China. China may be subject to considerable degrees of economic, political and social instability. China is an emerging market and demonstrates significantly higher volatility from time to time in comparison to developed markets. Over the last few decades, the Chinese government has undertaken reform of economic and market practices and has expanded the sphere of private ownership of property in China. However, Chinese markets generally continue to experience inefficiency, volatility and pricing anomalies resulting from governmental influence, a lack of publicly available information and/or political and social instability.

Chinese companies are also subject to the risk that Chinese authorities can intervene in their operations and structure. Internal social unrest or confrontations with neighboring countries, including military conflicts in response to such events, may also disrupt economic development in China and result in a greater risk of currency fluctuations, currency non-convertibility, interest rate fluctuations and higher rates of inflation.

China has experienced security concerns, such as terrorism and strained international relations. Additionally, China is alleged to have participated in state-sponsored cyberattacks against foreign companies and foreign governments. Actual and threatened responses to such activity and strained international relations, including purchasing restrictions, sanctions, tariffs or cyberattacks on the Chinese government or Chinese companies, may impact China's economy and Chinese issuers of securities in which the Fund invests. Incidents involving China's or the region's security may cause uncertainty in Chinese markets and may adversely affect the Chinese economy and the Fund's investments. Export growth continues to be a major driver of China's rapid economic growth. Reduction in spending on Chinese products and services, supply chain diversification, institution of additional tariffs or other trade barriers (including as a result of heightened trade tensions or a trade war between China and the U.S. or in response to actual or alleged Chinese cyber activity) or a downturn in any of the economies of China's key trading partners may have an adverse impact on the Chinese economy. The Fund's portfolio may include companies that are subject to economic or trade restrictions (but not investment restrictions) imposed by the U.S. or other governments due to national security, human rights or other concerns of such government. So long as these restrictions do not include restrictions on investments, the Fund is generally expected to invest in such companies.

Chinese companies are not subject to the same degree of regulatory requirements, accounting standards or auditor oversight as companies in more developed countries. As a result, information about the Chinese securities in which the Fund invests may be less reliable or complete. Chinese companies with securities listed on U.S. exchanges may be delisted if they do not meet U.S. accounting standards and auditor oversight requirements, which would significantly decrease the liquidity and value of the securities. There may be significant obstacles to obtaining information necessary for investigations into or litigation against Chinese companies, and shareholders may have limited legal remedies. Chinese companies may also be subject to significantly weaker recordkeeping requirements than the requirements imposed upon U.S. companies.

Market Risk. Market risk is the risk that a particular security, or Fund Shares in general, may fall in value. Securities are subject to market fluctuations caused by such factors as economic, political, regulatory or market developments, changes in interest rates and perceived trends in securities prices.

Derivatives Risk. The use of derivative instruments (i.e. swap agreements and forward contracts) involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. These risks include: (i) the risk that the counterparty to a derivative transaction may not fulfill its contractual obligations; (ii) risk of mispricing or improper valuation; and (iii) the risk that changes in the value of the derivative may not correlate perfectly with the underlying asset.

Active Management Risk. The Fund is actively-managed and its performance reflects investment decisions that the Adviser and/or Sub-Adviser makes for the Fund.

Depositary Receipts Risk. Depositary receipts may be less liquid than the underlying shares in their primary trading market. Any distributions paid to the holders of depositary receipts are usually subject to a fee charged by the depositary. Holders of depositary receipts may have limited voting rights, and investment restrictions in certain countries.

Swap Agreements Risk. The Fund may utilize swap agreements to derive its exposure to one or more of the China Dragons. Swap agreements may involve greater risks than direct investment in securities as they may be leveraged and are subject to credit risk, counterparty risk and valuation risk.

Consumer Discretionary Sector Risk. Consumer discretionary companies, such as retailers, media companies and consumer services companies, provide non-essential goods and services. These companies manufacture products and provide discretionary services directly to the consumer, and the success of these companies is tied closely to the performance of the overall domestic and international economy, interest rates, competition and consumer confidence. Success depends heavily on disposable household income and consumer spending.

Communication Services Sector Risk. Communication services companies may be subject to specific risks associated with legislative or regulatory changes, adverse market conditions, intellectual property use and/or increased competition. Communication services companies are particularly vulnerable to rapid advancements in technology, the innovation of competitors, rapid product obsolescence and government regulation and competition, both domestically and internationally. Additionally, fluctuating domestic and international demand, shifting demographics and often unpredictable changes in consumer tastes can drastically affect a communication services company's profitability.

Information Technology Companies Risk. Information technology companies face intense competition, both domestically and internationally, which may have an adverse effect on profit margins. Like other technology companies, information technology companies may have limited product lines, markets, financial resources or personnel. The products of information technology companies may face obsolescence due to rapid technological developments, frequent new product introduction, unpredictable changes in growth rates and competition for the services of qualified personnel.

Large Capitalization Risk. Large capitalization companies may be less able than smaller capitalization companies to adapt to changing market conditions.

New Fund Risk. The Fund is a recently organized investment company with a limited operating history. As a result, prospective investors have a limited track record or history on which to base their investment decision.

Non-Diversification Risk. As a "non-diversified" fund, the Fund may hold a smaller number of portfolio securities than many other funds.

Concentration Risk. The Fund is concentrated in the industry or group of industries comprising the consumer discretionary sector and communication services sector.

Roundhill Financial Inc. serves as the investment advisor. The Funds are distributed by Foreside Fund Services, LLC which is not affiliated with Roundhill Financial Inc., U.S. Bank, or any of their affiliates.

View original content to download multimedia:https://www.prnewswire.com/news-releases/roundhill-investments-launches-china-dragons-etf-drag-302266788.html

SOURCE Roundhill Investments

FAQ

What companies are included in the Roundhill China Dragons ETF (DRAG)?

As of October 3, 2024, DRAG includes nine companies: Tencent, Pinduoduo, Alibaba, Meituan, BYD, Xiaomi, JD.com, Baidu, and NetEase.

How often is the Roundhill China Dragons ETF (DRAG) rebalanced?

DRAG is rebalanced on a quarterly basis to maintain its equal-weight strategy across the selected 'China Dragons' companies.

What makes DRAG different from other China-focused ETFs?

DRAG is the only U.S.-listed ETF offering precise exposure to a concentrated basket of 5-10 of the largest and most innovative Chinese companies, unlike broader China ETFs.

When did the Roundhill China Dragons ETF (DRAG) start trading?

DRAG began trading on Cboe BZX on October 3, 2024.