Third crude futures ETF launched in Hong Kong

Mirae Asset claims its new fund offers gains to short-term investors if oil price rises and volatility remain high.

PUBLISHED : Wednesday, 15 June, 2016, 7:56pm
UPDATED : Wednesday, 15 June, 2016, 7:56pm

A third crude oil futures exchange-traded fund (ETF) is being launched in Hong Kong, just two months after the debut of the city’s first.

Offered by South Korea’s Mirae Asset Global Investments from June 16, the Mirae Asset Horizons S&P Crude Oil Futures Enhanced ER ETF is designed to provide gains to short-term investors if crude oil prices increase and volatility remains high, said its managers.

Korean peer Samsung Asset Management rolled out the Samsung S&P GSCI Crude Oil ER Futures ETF at the Hong Kong exchange on April 29, becoming the city’s first oil futures ETF.

It was followed by Chinese fund manager CSOP, which debuted a similar fund that also tracks West Texas Intermediate (WTI) crude oil futures in New York.

All three are managed by experts from South Korea.

Resembling mutual funds, ETFs are traded on a stock exchange like normal shares. They are usually organised around a theme, such as a specific index fund or group of stocks that represent an industry or sector of the economy.

As more of these products are launched, it proves it’s a market in demand.
Joe Yip, associate marketing director of Samsung’s ETF and index team

David Quah, product specialist at Mirae Asset, said Hong Kong’s Securities and Futures Commission requires that all ETFs must be managed by experts with five years’ experience in futures-based products. But they remain in short supply in the city.

Mirae launched its first oil futures ETF in South Korea in 2011.

Quah said after Hong Kong regulators gave the green light to leverage and inverse ETF this year, some local asset management firms decided to hire Korean experts to launch a batch of ETFs.

Samsung launched Hong Kong’s first leveraged and inverse ETF on Monday, while Mirae said it is planning to roll one out soon.

“As more of these products are launched, it proves it’s a market in demand,” said Joe Yip, associate director of Samsung’s EFT and index team.

He said oil price movements are tracked closely online by Hong Kong investors.

But before the launch of the oil futures ETFs, oil assets were largely allocated through buying stocks of oil enterprises, or by opening overseas accounts to trade in oil-related derivatives.

However, share prices of oil producers not always follow the movement of oil prices.

Crude oil products are generally seen as offering a hedge against falls in Hong Kong stocks, and as a protection against inflation, Quah said.

The price of WTI has surged from a 12-year low in February of US$26 a barrel to around US$50 recently.

During the recent rally in crude prices, Yip said Samsung’s oil futures ETFs regularly featured in Hong Kong’s top ten exchange-traded funds, in terms of daily turnover.