BlackRock to launch Hong Kong’s cheapest Hang Seng Index ETF

New fund will have ongoing charges of nine basis points, beating the 10bps of the market leader, Tracker Fund of Hong Kong.

PUBLISHED : Thursday, 17 November, 2016, 6:59pm
UPDATED : Thursday, 17 November, 2016, 10:18pm

BlackRock, the world’s biggest asset manager, is launching Hong Kong’s cheapest Hang Seng Index Exchange Traded Fund (ETF) to steal a march on Tracker Fund of Hong Kong, the city’s most-popular ETF.

BlackRock’s iShare Core Hang Seng Index ETF, to be listed on November 23, is the city’s third ETF that tracks the blue-chip benchmark, following Tracker Fund, managed by State Street Global Advisors Asia and Hang Seng Index ETF by Hang Seng Investment Management.

ETFs are marketable securities that track an index, a commodity, bonds, or a basket of assets.

The new ETF will have ongoing charges of nine basis points, beating the 10bps of Tracker Fund. It has also set its minimum investment threshold at HK$800 per lot, the lowest among the three, and allows investors to trade in Hong Kong dollars, yuan and US dollars.

Cyrus Mui, director of iShares, said the fee decision was made as the business scale and efficiency of BlackRock worldwide allows it to offer such a low-cost ETF.

“We don’t consider this as competing with Tracker Fund, but felt this is what we are able to offer,” Mui said.

Tracker Fund has been Hong Kong’s most-actively traded ETF, with HK$80.4 billion total assets under management and daily average turnover of HK$1.49 billion year to date, the highest among more than 170 ETFs offered in the city, according to data from Hong Kong Exchanges and Clearing.

It was listed in 1999, as a way of allowing the Hong Kong government to withdraw from the stock market after it bought a large bulk of Hong Kong stocks to stabilise the Hong Kong dollar amid the Asian financial crisis and short-selling by speculators including George Soros.

ETF providers have been cutting fees and launching cheaper-than-ever products in an effort to win customers.

France-based Amundi Asset Management last month launched a FTSE China A50 ETF, the cheapest in the category, and tracking one of the most popular benchmarks in the city.

Most investors trade a handful of ETFs in the market, but a large number have recorded slim daily turnover. Hong Kong Economic Journal has reported that as many as 20 ETFs could be delisted from the exchange.

Mui said that fund termination shows the maturity of a capital market, and provides fund managers a chance to offer new and better products.

“Delisting is not necessarily a bad phenomenon,” he said.

The Hang Seng Index ETF is one of nine products in BlackRock’s iShares “Apac Core Series”, which covers markets such as India, Australia, the US, and Asia excluding Japan.

iShares vice president Connie Chan said the series aims to allow investors to track other markets without time-zone concerns.