Hong Kong ETF market must build up ‘one-stop shop’ ahead of Connect launch, says bourse operator

The Hong Kong exchange-traded fund industry needs more assets under management and product variety to fully benefit from the launch of the ETF Connect programme, said Brian Roberts, head of exchange-traded products at bourse operator Hong Kong Exchanges and Clearing.

Roberts, who said the industry was “setting itself up nicely”, added: “Larger assets under management will drive more liquidity to this market. We need to build out the product shelf because investors want a one-stop shop, and this is where the innovation we are seeing is just scratching the surface.”

The Hong Kong stock exchange is working with industry players to construct a market structure for the efficient creation and redemption of shares in ETFs, as well as pricing. An ability to facilitate good liquidity to cope with potential big buying demand was also needed before the ETF Connect was implemented, said Roberts.

The turnover in the city’s ETF market has increased by about 15 per cent per annum in recent years, but this has not translated into growth in assets under management. Investors have only bought a net US$842 million in ETFs this year, compared with net inflows of US$48 billion in the whole of Asia-Pacific, according to Bloomberg data.