Tiger Brokers, a Beijing-based fintech backed by Wall Street billionaire Jim Rogers, is entering the US market and listing its first ETF under its TigerShares sub-brand. The TigerShares China-US Internet Titan ETF (TTTN) will track an index of the 10 largest publicly-traded Chinese internet companies and the 10 largest publicly-traded US internet companies. Companies are weighted by market cap, but their weights are modified at each rebalance so that:
the aggregate weight of the Chinese companies is close to the weight of the US companies;
no company takes more than 10% of the index.
The US internet giants have to be taken from the Nasdaq Internet Index, the prospectus says. While the Chinese internet giants can be listed on any US or Chinese exchange.
Reading through the prospectus it looks like day-to-day portfolio management will be outsourced to two advisers based in the US:
, the fund's adviser, and Vident, the subadvisor.
Analysis - unlucky timing
As we all know, timing the market is hard. But whether ETF providers like it or not, their new listings are always, in a way, at the mercy of market timing. Because every advisor and his dog look at recent performance when picking funds (they're not meant to, but like mice at a mouse trap they do anyway) those ETFs that have had a run of bad luck at the time of listing can be in for a rough time.
China stocks have been declining of late. So have internet companies. With discount rates getting revised upwards as the Fed raises rates, internet growth companies are having their valuations written down. A dollar tomorrow is worth less than a dollar today, every finance textbook instructs. And with discount rates only set to go even higher, a dollar tomorrow will soon be worth much less than a dollar today. This is a problem for internet companies as much of their valuations are based on what they're modeled as earning in the future (enter Amazon).
We're bullish on China and the internet. But we hope the timing won't be too much of a problem for this interesting new listing.
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