Korea Investment Trust Management Launches Korea Investment China IPO Fund No. 2

[Asia Economy Reporter Eunmo Koo] Korea Investment Trust Management announced on the 12th that it will launch the "Korea Investment China IPO Investment Securities Investment Trust No. 2 (Mixed Stock)" (hereinafter referred to as Korea Investment China IPO Investment Fund No. 2), which mainly invests in IPOs on China's STAR Market (Ke Chuang Ban) and ChiNext (Chuangye Ban, Chasdaq). Sales will be conducted from today until the 19th of this month, with a fundraising target of approximately 65 billion KRW. Subscriptions are available through Korea Investment & Securities, Hana Bank, NH Investment & Securities, KB Securities, DB Financial Investment, and others.

The STAR Market (Ke Chuang Ban) is a stock market established by the Chinese government on the Shanghai Stock Exchange in July last year to support capital raising for technology innovation companies. As of the end of August this year, 165 companies have been listed, which is more than the existing Chinese stock markets during the same period: ChiNext (87 companies), Main Board (74 companies), and SME Board (36 companies). It is characterized by a higher number of listed companies and a higher institutional allocation ratio. There are no price limits on the upper and lower bounds for the first five days after listing, and thereafter a daily price limit of 20% applies.

ChiNext (Chuangye Ban) is a market on the Shenzhen Stock Exchange focused on small and medium-sized technology stocks, similar to the U.S. Nasdaq. Since August, the listing system has changed from an approval system to a registration system, significantly easing listing requirements. The institutional allocation volume has increased to a scale similar to the STAR Market, and there are no price limits on the upper and lower bounds for the first five days after listing.

The "Korea Investment China IPO Investment Fund No. 2" invests in IPOs newly listed on the STAR Market, ChiNext, Main Board, and SME Board of the Chinese stock market. The average stock price increase rate of IPOs listed in China over the past year (July 2019 to August 2020) is approximately 183% (based on the highest price within 14 days after listing of 362 stocks). In particular, the average stock price increase rate of IPOs listed on the STAR Market is about 210% (165 stocks). Since 2011, the Korea Investment Trust Management Shanghai office, responsible for local research in Shanghai, has participated in demand forecasting and managed stock positions.

Institutional investors must hold stock assets worth 60 million yuan (approximately 10 billion KRW) per exchange to subscribe to Chinese IPOs. The "Korea Investment China IPO Investment Fund No. 2" holds stock assets composed of index components such as Shanghai-Shenzhen 300 (CSI300) and Shanghai 50 (SSE50) and plans to participate in new listings (IPOs). If the fund size exceeds 40 billion KRW, it will additionally hold stocks listed on the Shenzhen Stock Exchange to participate in IPOs on ChiNext, Main Board, and SME Board. Furthermore, it plans to minimize volatility and increase stability by using methods such as selling futures of the relevant index.

Hyun Dongsik, head of the Shanghai office, said, "Recently, Chinese authorities implemented the so-called 'ChiNext reform,' converting the IPO system of ChiNext to a registration system. Korea Investment China IPO Investment Fund No. 2 will participate not only in the STAR Market but also in demand forecasting for ChiNext, significantly increasing the number of investable IPOs and thus enhancing expected returns."

Meanwhile, the "Korea Investment China IPO Investment Fund" charges a front-end sales fee of 1% and an annual total fee of 1.2% for Class A shares. Class C shares have no front-end sales fee but an annual total fee of 1.72%.

This content was produced with the assistance of AI translation services.