Increased security
Peter Guy looks at the attractions of ETFs, or exchange traded funds
Exchange traded funds - ETFs - are gradually finding their way into the world of Asia's retail and corporate investors, who are discovering their unique portfolio characteristics and relatively lower costs.
ETFs are securities that track an index, a commodity or a basket of assets, like an index fund, but that trade like a stock on an exchange. Their fans say they give the diversification of an index fund with the ability to sell short, buy on margin and buy as little as one share.
Despite some recent ETF withdrawals from the Hong Kong market, indicators for ETF acceptance and growth in Hong Kong are still buoyant.
The major benefits of ETFs for investors - liquidity, transparency, trading flexibility and diversification - are still the key benefits and standards that ETFs must achieve in order to drive the more important trends in the local investment scene.
Globally, the Exchange Traded Products (ETP) industry has continued to grow in 2012, despite market turbulence in Europe. It attracted US$18.4 billion in net new assets during February, according to BlackRock. Global assets held in ETPs reached US$1.72 trillion at the end of February, an increase of 12.8 per cent year to date, with combined inflows for January and February standing 111 per cent higher than recorded in the first two months of 2011.
Emerging market equity ETPs saw significant inflows as a result of a positive global trend by gathering US$7.9 billion of new assets in February and US$14.5billion year to date. This represented the strongest-ever start to a year for this product category and reversed the outflows experienced in the second half of 2011. Currently there are 89 ETFs listed on the Hong Kong Stock Exchange, representing about US$26 billion in assets under management.