Deutsche Bank, which only this year entered Asia's exchange-traded funds (ETF) market, has expanded its reach in the region to include Hong Kong.
Deutsche Bank has listed six ETFs, branded as db x-trackers, on the Hong Kong Stock Exchange. This follows the listing of four ETFs in Singapore in February.
The six ETFs in Hong Kong offer investors a variety of underlying assets cutting across varying markets and indices. They are the MSCI USA Total Return Net (TRN) Index ETF, FTSE/Xinhua China 25 ETF, S&P CNX Nifty ETF, MSCI Korea TRN ETF, MSCI Taiwan TRN Index ETF, and FTSE Vietnam ETF.
In Singapore, the db x-trackers include the S&P 500 Short ETF, which is Asia's first "inverse" ETF. This tracks the S&P500 Index, but in the opposite direction. Investors who expect the S&P500 Index to fall can buy this ETF, as it is based on the short index which will rise when the main index falls. The other ETFs are the MSCI Taiwan TRN Index ETF, the FTSE/Xinhua China 25 ETF, and the S&P CNX Nifty ETF.
ETFs are traded on an exchange just like a stock. An ETF holds assets such as stocks or bonds and trades at around the same price as the net asset value of its underlying assets over the course of the trading day. Some ETFs track an index, while others are custom-made to track specific assets. Investors usually like ETFs for their low costs and stock-like features -- cheap, liquid beta -- although in Asia, their uses as sophisticated portfolio construction tools have yet to catch on.
In the last couple of years, ETFs were seen as more of a passive, market-access product. But ETFs are now increasingly becoming investment solutions.
In a previous interview with AsianInvestor, Thorsten Michalik, Frankfurt-based global head of db x-trackers at Deutsche Bank, said he expects to have at least 20 ETF listings in Asia.
Deutsche Bank began offering innovative ETF products to European investors in January 2007. Over the past two-and-a-half years, the company has expanded its offerings in Europe from eight to more than 100 products. With more than €21 billion in assets under management, Deutsche Bank ranks third in Europe and fifth globally among its peers in the ETF market.
Deutsche Bank is active in almost all asset classes. One way Deutsche Bank differentiates itself from other ETF providers is the liquidity it is able to provide because the bank is its own market maker for its funds. Around 50% of its trades in Europe are done off-stock exchange. Even if the product is an ETF, people know that they can call Deutsche Bank and they will receive a price for the ETF.
Meanwhile, the db x-trackers in Hong Kong are based on the following indices.
The MSCI USA TRN Index is a free float-adjusted market capitalisation index that is designed to measure developed market equity performance in the US on a total return basis with the reinvestment of net dividends. The index has 602 constituents and its top five are ExxonMobil, Microsoft, Johnson & Johnson, Procter & Gamble, and AT&T.
The FTSE/Xinhua China 25 Index is designed to represent the performance of blue-chip companies incorporated in mainland China that are available to international investors. The Index includes the 25 largest Chinese companies (ranked by total market capitalisation) listed on the Hong Kong Stock Exchange that are sufficiently liquid to be traded. Each constituent's weight is capped at 10% of the total index value. The index's top five holdings are China Mobile, China Life Insurance, Industrial & Commercial Bank of China, Bank of China, and PetroChina.
The S&P CNX Nifty Index is a well-diversified 50 stock index in India accounting for 22 sectors of the economy. The index is managed by India Index Services and Products, which is a joint venture between National Stock Exchange of India and Credit Rating Information Services of India. The index's top five constituents are Reliance Industries, Oil & Natural Gas Corporation, NTPC Limited, Bharti Airtel, and State Bank of India.
The MSCI Korea TRN Index is a free float-adjusted market capitalisation index reflecting the performance of Korean companies that are available to investors worldwide on a total return basis with net dividends reinvested. The index has 98 constituents. Its top five constituents are Samsung Electronics, Posco, KB Financial Group, Shinhan Financial Group, and Hyundai Motor.
The MSCI Taiwan TRN Index is a free-float adjusted market capitalisation index. The index represents Taiwanese companies that are available to investors worldwide. The index has 121 constituents. Its top five constituents are Taiwan Semiconductor Manufacturing, Hon Hai Precision Industry, Chunghwa Telecom, Media Tek, and China Steel.
The FTSE Vietnam Index is a subset of the FTSE Vietnam All-Share Index and comprises of those companies that have sufficient foreign-ownership availability. The index has 27 constituents. Its top five constituents are Petroviet Fertlz, Petrovietnam Finance Joint Stock, Petrovietnam Dri, and Hoa Phat Group.
There are 180 equity-based ETFs in the Asia-Pacific region with 223 listings across 12 countries and 15 exchanges, according to data from Deutsche Bank. Japan has the largest market share by AUM accounting for 48.15% of the whole market, while China has the largest market share by turnover with 42.63%. In Hong Kong, as of end-June, more than $15.5 billion was invested in ETFs.