Barclays Global Investors, HSBC Investment Funds, Hang Seng Investment Management and Lyxor International Asset Management have all subsequently introduced ETFs. So it is now possible to use them to track the individual markets in China, India, South Korea and Taiwan. There are also two bond-focused index funds and one devoted to commodities.

Lyxor offers two particularly broad ETFs, one tracking the Morgan Stanley Capital International (MSCI) World Index, intended to capture global stock performance, and one tracking the MSCI Asia-Pacific ex Japan index, providing regional exposure in Asia.

The company also recently introduced a Russia-focused ETF in Hong Kong and one that tracks the Nasdaq-100 Index, which is dominated by technology companies.

The argument for ETFs is that conventional wisdom suggests about 80 per cent of mutual funds perform worse than the stock market as a whole, due to a combination of excessive fees and poor execution of investment strategy.

Mutual fund managers have a headwind on performance courtesy of their annual management fees, typically between 1 and 2 per cent. It seems insignificant but mounts up over time.

The fees are supposed to pay for active management and insightful stock selection.

But many managers stay relatively close to the index, anyway, because they know their performance will be judged against it.

So why not just buy the index itself? ETFs and index funds allow investors to do exactly that. Both products track a particular index or sector, mapping its performance almost exactly.

ETFs are passively, not actively, managed - the only changes in the portfolio come when there is a change in the underlying index, either because of a reshuffle of its members or a change with one of the component companies.

Because the stock selection is automatic and can basically be done by computer, such products typically charge a much smaller annual fee, normally a fraction of 1 per cent.

The main difference between an ETF - sometimes called an index share - and an index fund is the pricing. An ETF trades like a stock, with instant pricing and trading available throughout the trading day, whereas an index fund may only price once a day, at the end of trading, and have periodic redemptions and subscriptions, like a mutual fund or unit trust.

The 'exchange-traded' feature of the ETF makes it highly liquid, or easy to buy and sell, as well as simple to price. An ETF also removes the guesswork from whether it performs better or worse than the market as a whole - you match it exactly.

'They are a good way of gaining exposure to a sector,' Hong Kong-based money manager Puru Saxena said. 'They generally follow an index, so you don't have a problem of underperformance, and the fees are generally quite reasonable as well.'

Investors can use exchange-traded funds to track a market or region as a whole or to target specific industries, sectors or countries. The product range is mostly developed in the United States, where ETFs that track sub-sectors of all shapes and sizes are available.

Some money managers have a disdain for index shares, saying they don't offer the prospect of smart stock selection or outperformance. You'll be part of the crowd.

Steve Gollop, chief executive of investment adviser company Tyche Group, said he rarely selected index shares for his clients. He would rather seek out the top-performing fund managers.

'It's generally a cheap way to get a long-term holding of an asset, if you just want to be in index,' Mr Gollop said. 'But fundamentally that goes against every grain in our body because we're looking for something that is better managed.'

Other asset managers swear by ETFs and use them as core portfolio positions. You won't outperform stock markets by using ETFs, but you will not be paying money to a manager who underperforms, either.

'Obviously, a well-managed mutual fund that outperforms the benchmark is the best option,' Mr Saxena said. 'However, if you can't find a mutual fund, then ETFs are a good option.'