Asian ETF market poised for 'explosive growth'

PUBLISHED : Monday, 17 September, 2012, 12:00am
UPDATED : Monday, 17 September, 2012, 8:48am

The market for Exchange Traded Funds (ETFs) in Asia has grown rapidly since the start of the year. ETF providers say Asia has experienced faster growth than other mature markets, such as the United States and Europe.

An example of how fast the ETFs market is growing in Asia can be gauged from the fact that since August, nine new products have been launched in the Asia-Pacific Exchange Traded Products market.

E Fund Management listed one equity ETF on Hong Kong's stock exchange tracking the CSI 100 Index.

CSOP Asset Management made its debut with a maiden equity ETF listing on Hong Kong's stock exchange tracking the FSTE China A50 Index. Furthermore, Hanwha Investment Trust Management listed seven equity ETFs on the Korea Exchange. Four of these track FnGuide Sector Indices, chemical, iron and metal, shipbuilding and transport, and carmakers respectively.

Three other ETFs track FnGuide Defensive Index, FnGuide Market Leader Index and FnGuide Dividend Index respectively.

Marco Montanari, director and head of Deutsche Bank ETFs and db-X funds, Asia, says the ETF market in Asia has shown tremendous growth since the start of this year.

"In Asia, assets under management to date have grown more than 20 per cent," Montanari says. "Growth in absolute terms is above US$20 billion."

He points out that the growth in Asia is faster than in Europe, a market which is three times its size. Montanari says the Asian ETF market is at the start of an explosive growth and, in future, investors will start choosing investment products in the same manner as they do in more mature markets such as the US and Europe.

Regarding the cost of ETF products in Asia, Montanari says having a uniform regulatory framework will help lower the cost to the providers and ultimately to investors, but that this process will take years.

According to figures available from ETF providers, Asia-Pacific exchange traded products (ETP) recorded monthly cash inflows of US$1.5 billion last month, taking the yield-to-date (YTD) cash flows to plus US$22.3 billion or 24.4 per cent of last year's end assets-under-management (AUM). This includes US$1.1 billion of inflows from two new ETFs with a China focus.

Before that, the Asia-Pacific recorded monthly flows of US$13.4 billion, US$4.4 billion and US$2.4 billion for May, June and July respectively.

Within equity products, ETFs offering exposure to China, South Korea and Japan received robust cash inflows of US$1.2 billion, US$1 billion and US$300 million respectively, while Taiwan-focused ETFs experienced outflows of US$400 million.