Barclays Global Investors yesterday listed its iShares BSE Sensex India Tracker on the Hong Kong Stock Exchange. Investors demonstrated enthusiasm for easy access to the Indian stock market and the $20 million exchange-traded fund (ETF) saw 726,000 shares turn over, says Joseph Ho, head of iShares for BGI in Asia ex-Japan.

ôWe were pleasantly surprised by the activity,ö he says, noting that while India is of obvious interest to Singaporean investors, BGI wasnÆt sure to what extent Hong Kongers would be keen. He notes that most investors are retail.

This represents BGIÆs second international India ETF, following the June listing of the iShares MSCI India fund on the Singapore Stock Exchange. These are the only international ETFs tracking India indices.

India ETFs are difficult to create for international investors, not only because of capital gains issues, but also because stocks in the indices have quotas for foreign investment, several of which have been reached. For both products, ETF relied on Citigroup to structure participatory notes, which the ETFs invest in, rather than creating baskets of shares to reflect the index. Citigroup takes the risk and uses its local market presence to hedge the index.

Ho explains the firm wanted to complement the Singapore-listed MSCI ETF in order to broaden the investor base, both geographically as well as by type of index. The Singapore ETF has grown to $70 million of assets, which is not a large amount, but its trading volume has been big: around 200,000 shares per day on average, at a price fluctuating around $4.0-$4.5.

ôWeÆve had more than 100% turnover in the first three or four months,ö Ho says of the Singapore ETF. ôThe turnover is bigger than the total size of the fund.ö

He attributes this to the timing. The Singapore ETF launched shortly after the Indian market corrected sharply, by 30% over May and June. Investors were wary of entering at that point but have been active traders.

Ho expects the Hong Kong-listed Sensex ETF will become bigger over time, particularly as more investors compare India and ChinaÆs growth stories. He thinks it can reach the same size as the iShares FTSE/Xinhua A50 Tracker, which has grown to more than $1 billion since its launch in late 2004. The China ETF (in which Citigroup also provided p-notes) has traded around 2.2 million shares per day over the past six months. At HK$69 per unit, thatÆs a daily turnover of HK$151.8 million ($19.5 million).