Advertisement
Advertisement

Exhange-traded funds gaining popularity in Asian markets

Nick Westra

Transactions in Hong Kong's exchange-traded funds (ETFs) rose last month as asset managers ramped up their offerings to keep pace with growing demand.

State Street Global Advisors unveiled a new fund that tracks mainland-related equities listed as B shares and in overseas markets in Hong Kong, Taiwan and Singapore. And Lippo Investments Management has officially joined the fray and launched operations as an ETF provider.

There were 66 ETFs listed in Hong Kong as of September 20, covering asset classes across the board, including equities, commodities, bonds and money markets. That was up from 43 ETFs at the end of last year and 24 in 2008, according to Hong Kong Exchanges and Clearing.

'Local investors were not really eager about this [investment] before,' said Ricky Tam Siu-hing, the chairman of the Hong Kong Institute of Investors. 'But their appetite for a monthly savings plan using the ETF is increasing.'

ETFs track a specific benchmark index and trade like stocks, moving up or down according to the benchmark's performance. They are considered suitable as a component of a savings plan because they are generally transparent and can provide diversification by offering exposure to a wide range of areas. There are some concerns about sufficient liquidity, however, in lesser-traded ETFs.

The investment product was first introduced in Western markets about 20 years ago and has recently become more popular in Asia, particularly after the financial crisis.

Tam said overseas investors might also be interested in locally listed ETFs tracking mainland-related markets given the recent appreciation in the yuan.

The SPDR FTSE Greater China ETF launched by SSgA has climbed 4.2 per cent since trading began last month. Turnover has been thin over the past two weeks, however, topping out at a one-day high of just over HK$9 million, according to Bloomberg.

But that is typical for any new ETF, said Kelly Driscoll, a senior managing director at SSgA.

Meanwhile, SSgA's Tracker Fund of Hong Kong, launched more than a decade ago, has maintained volumes above HK$150 million in 11 of the past 12 trading sessions.

SSgA is planning to add four staff in Hong Kong by the end of next month, including two senior regional managers, Driscoll said.

The firm may launch at least three or four ETFs in the market over the next year. It currently manages nine products and 12 listings in the Asia-Pacific.

Meanwhile, Lippo Investments unveiled plans to carve out its spot in the ETF market by providing fund-of-ETF products, which mixes and matches tracking funds across markets and asset classes to fit a trading strategy.

'Our 'fund-of-ETFs' approach has given us a niche position to fill a gap with the safe, transparent and cost-effective ETF-based products that many investors seek,' said Arthur Wu, a sales and marketing director at the company.

Lippo said it was initially targeting professional and institutional investors.

Deutsche Bank said it planned to further expand its product range over the next six months. Earlier this year, it launched 11 ETFs that followed mainland markets by using swap-based transactions.

'We will continue with our educational efforts,' said Marco Montanari, the head of the bank's ETFs in Asia. 'More investor education is the key for the growth of the whole ETF market in Asia.'

Driscoll said the growing competition in the ETF market would also drive growth. 'It's a real good thing because it gets the awareness and the education out there,' she said. 'The more players there are, the more robust the education is and the more robust the product is.'

Safe investment

Transparency and wide exposure make ETFs suitable for savings plans

More exchange-traded funds have gone on the market. By September 20, the number of funds listed in Hong Kong is: 66

Post