New Chinese fund cleared to invest in Korean chip firms

chinese korean fund
FILE PHOTO: A Chinese national flag flutters outside the China Securities Regulatory Commission (CSRC) building on the Financial Street in Beijing, China July 9, 2021. REUTERS/Tingshu Wang/File Photo

SHANGHAI (Reuters) – China’s securities regulator has given the greenlight to the country’s first mutual fund targeting top Chinese and South Korean chipmakers, an official at Huatai-PineBridge Fund Management Co said, amid an escalating Sino-US tech war.

The China Securities Regulatory Commission’s approval comes amid heightened geopolitical tensions between the world’s two largest economies. The Biden administration published a sweeping set of export controls on Friday, seeking to hobble China’s chip industry.

Huatai-PineBridge made the application for regulatory approval on Aug. 9.

Chinese and Korean semiconductor synergies

The exchange-traded fund (ETF) will invest in top Korean semiconductor firms including Samsung Electronics and SK Hynix, as well as Chinese chipmaking giants such as Semiconductor Manufacturing International Corp (SMIC) and Montage Technology Co.

“The Chinese and Korean semiconductor industries are expected to be closely integrated,” creating synergies, Huatai-PineBridge said in prepared marketing material for the ETF, whose launch date has not yet been determined.

The fund will also benefit from China’s accelerated pace towards tech self-sufficiency amid US sanctions, according to the marketing material, which mentioned the US blacklisting of China’s Huawei Technologies, and the recently enacted CHIPS and Science Act.

South Korea unruffled by US rules update

In 2021, South Korea was China’s second-biggest exporting country in equipments, including chipmaking tools, and Chinese exports to South Korea have also been rising, the fund manager said.

South Korea said on Saturday there would be no significant disruption to equipment supply for Samsung and SK Hynix’s existing chip production in China from the US move.

The new US export controls are an abuse of trade measures, China’s foreign ministry spokesperson Mao Ning said on Saturday.

The newly approved ETF will track the CSI KRX China-Korea Semiconductor Index.

The index was launched as part of a broader cooperation agreement signed last year between the Shanghai Stock Exchange and the Korean Exchange (KRX) to promote cross-border investment between the two markets.

(Reporting by Samuel Shen and Brenda Goh; Editing by Ana Nicolaci da Costa)

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