In a time marked by market fluctuations and investment hesitance, the burgeoning popularity of the Science and Technology Innovation Board (SSE STAR Market) themed exchange-traded funds (ETFs) highlights a robust appetite among investorsSince the launch of the first STAR 50 ETF in September 2020, the total assets under management of ETFs tracking the STAR Market have exceeded 200 billion yuan, demonstrating impressive growth in just over three years.

Recent months have witnessed a surge in the issuance and holdings of ETFs linked to the STAR 100 IndexNotably, the recently established Bosera Shanghai Stock Exchange STAR 100 ETF reached a milestone of over 5 billion yuan in assets within just over two months since its inception in September, while the Huaxia Shanghai Stock Exchange STAR 100 ETF, launched on November 8, 2023, achieved an inaugural scale of around 3.895 billion yuan.

Even during periods of market downturns, the attractiveness of these STAR Market ETFs remains evident

Fresh capital continuously flows into the STAR ecosystem, contributing to a significant rebound in the STAR Market broad-based indicesFor instance, the STAR 100 Index recorded a remarkable increase of 5.86% this November, making it the top performer among the broad-based indices for the month.

The Bosera STAR 100 ETF recently made headlines by breaking the 5 billion yuan asset mark, achieving a transaction volume of nearly 8.94 billion yuan on November 13. This positions it as the leader in terms of scale among the seven STAR 100 ETFs currently listed.

The STAR 100 Index functions as a crucial benchmark for investors, representing substantial mid-cap stocks not included in the STAR 50 IndexThis index is composed mainly of companies within the electronics and pharmaceuticals sectors, with over 30% exposure to healthcare and more than 20% to semiconductor stocks, demonstrating strong growth potential and favorable valuation metrics.

With influential asset managers such as Bosera, Penghua, Yinhua, and Guotai taking part in the initial launch of the STAR 100 ETF series, it's evident that the investment community is eagerly eyeing opportunities in this space

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Following this, a second wave of STAR 100 Index ETFs from Huaxia Fund, Huatai-PB Fund, and E Fund also received official notification of their establishment on November 8.

Despite the broader A-share market experiencing a downturn, investor enthusiasm for the STAR Market's broad-based indices remains robustAs of November 13, a total of seven STAR 100 Index ETFs boast a combined asset size exceeding 20 billion yuan, with Bosera, Penghua, and Huaxia's respective funds reaching 5.213 billion yuan, 4.513 billion yuan, and 3.898 billion yuan.

The STAR Market has firmly established itself as a premier platform for China's hard-tech companies since its inception over four years agoAs of November 14, the number of publicly listed companies on the STAR board has risen to 563, with a total market capitalization of 6.73 trillion yuan.

The universe of public market equity funds has been expanding, with the first batch of STAR-themed funds released in April 2019 and the STAR 50 ETFs seeded in September 2020. Various types of STAR-themed ETFs now exist, catering to sector-specific interests such as new information technologies, new materials, semiconductors, and growth strategies.

Research from Guosen Securities indicates that as of the second quarter of 2023, the allocation ratio of public funds to the STAR Market reached an impressive 8.82%. This surge in interest has been largely driven by ETFs—markedly, the 39 ETFs linked to the STAR board surpassed 200 billion yuan in total assets, evidencing swift growth.

In September, the Huaxia STAR 50 ETF reported a record of over 1 trillion shares, becoming the first equity ETF in the A-share market to cross this threshold

Additionally, the total size of ETFs tracking the STAR 50 Index exceeded 140 billion yuan, positioning them as the second largest type of broad-based index ETF in China's market.

Despite the prevailing market uncertainties, the STAR-themed ETFs continue to garner substantive inflowsThe STAR 100 Index notably has gained traction, reflecting a cumulative increase of 5.86% this month, thus claiming the top spot among broad-based index performancesFurthermore, the initial net values of the first four STAR 100 ETFs hover around 1.05 yuan, indicating profitability for holders and creating a favorable investment atmosphere for further capital inflow.

Public funds continue to file new applications for additional STAR-themed ETFs, with notable recent submissions for STAR semiconductor ETFs by Bosera and Southern Funds, and a STAR biopharmaceutical ETF proposed by Harvest Fund and ICBC Credit Suisse.

The STAR 100 Index is poised for accelerated growth, comprising 100 securities characterized by mid-range market capitalization and superior liquidity, selected from a broader set of securities relative to the STAR 50 Index

The current market sentiment shows a favorable inclination towards mid-cap companies, with the CSI 2000 Index leading the charge in year-to-date performance among major broad indices.

Experts suggest that the STAR Market holds considerable investment appealRecent insights from Su Junjie, head of quantitative and derivative investments at Penghua Fund, highlight that valuation indicators and technical patterns position the STAR Market within a rebound phaseKey sectors like electronics and biomedicine are undergoing transformative changes that may trigger industry upswingsAs the market sentiment and micro liquidity improve, greater synchrony between STAR themed equities and growth investment styles is anticipated.

Moreover, fund manager Tang Yibing of Bosera Fund emphasized that the sectors represented within the STAR 100 Index are largely comprised of strategically pivotal emerging industries

Current metrics reveal that these component stocks possess relatively low market capitalization and revenue structures, signaling substantial growth potential as they leverage innovation to capture industry tailwinds.

In terms of optimal allocation timing for the STAR Market, Su Junjie highlighted that the economy is entering a stabilization phaseGiven the progressively favorable fundamental conditions, coupled with robust monetary policies and a resilient yuan, market risks appear containedThe combination of a likely recovery phase for broader indices experiencing significant valuation compression further supports increasing positions in these foundational areas.

Tang Yibing underscored a positive outlook for the STAR 100 Index's performance over the next two years, with expectations of sustained growth