Nasdaq Taking Apple, Microsoft to Shenzhen With Tech Stock ETF 

Nasdaq OMX Group Inc. is seeking to tempt Shenzhen stock investors with Apple Inc. and Microsoft Corp. amid a rally in Chinese technology shares that’s making the U.S. dot-com bubble look subdued.

Nasdaq will start a exchange-traded fund in Shenzhen tracking the Nasdaq 100 Index by early in the third quarter, Robert Hughes, who manages the New York-based company’s global indexes business, said in an interview on Wednesday. It’s licensed GF Fund Management Co. to offer the Guangfa Nasdaq-100 Index Fund, which will be Shenzhen’s first ETF based on the gauge, he said.

The rally that’s added more than $5 trillion to the value of Chinese equities over the past year has been even more pronounced in Shenzhen, where the market is dominated by smaller technology companies. The Shenzhen Composite Index headed for another record close Friday after a 165 percent 12-month rally. Tech stocks make up almost half of the small-cap ChiNext index, which trades at 117 times reported earnings, compared with a multiple of 23 for the Nasdaq 100.

“When you look at the performance of the ChiNext technology companies, it’s tremendous but also the valuations of those companies is starting to become historic,” said Hughes. “When you start to have those outsized valuations you start to get nervous. Not only do you have diversification with the Nasdaq 100 based on what Chinese investors are looking at today, you also get the opportunity to invest in significant growth companies that are much more mature.”

Apple and Microsoft together comprise about 22 percent of the Nasdaq 100. Amazon.com Inc., Google Inc. and Facebook Inc. round out the top five.

Cheap Apple

At 16 times trailing earnings, Apple shares are cheaper than every member of the CSI 300 Information Technology Index. Medical e-commerce and online games provider Searainbow Holding Corp. is the most expensive stock on the Shenzhen technology gauge, trading at more than 10,000 times reported profits.

Nasdaq’s Shenzhen fund comes after the company started a Shanghai-listed ETF with Guotai Asset Management Co. in 2013. Chinese investors also have access to qualified domestic institutional investor funds that track the Nasdaq 100, such as one started by GF Fund Management in August 2012, and a fund created by Guotai Asset.

Source: Bloomberg – Nasdaq Taking Apple, Microsoft to Shenzhen With Tech Stock ETF

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