HSBC Global beats BOCI-Prudential to HK-Taiwan ETF finish line

HSBC Global Asset Management (Taiwan) will bring the first Hong Kong exchange-traded funds (ETFs) to Taiwan when it lists two Hang Seng ETFs on the Taiwan Stock Exchange today (August 14). This listing will be slightly ahead of the August 17 cross-listing of the BOCI-Prudential Asset Management's W.I.S.E.-CSI 300 China Tracker in Taiwan.

The Hang Seng ETFs to be cross-listed in Taiwan are managed by Hang Seng Investment Management in Hong Kong. These will be the first Hong Kong ETFs brought to Taiwan for listing using the direct cross-border approach. HSBC Global Asset Management (Taiwan) Limited has been appointed as the master agent for the listing by Hang Seng Investment Management.

The listing of the two ETFs -- the Hang Seng Index ETF and the Hang Seng H-Share Index ETF -- were approved by the Taiwan Financial Supervisory Commission (FSC) on July 29. The Hang Seng Index ETF invests mainly in the constituents of the Hang Seng Index while the Hang Seng H-Share Index ETF invests mainly in the constituents of the Hang Seng China Enterprises Index. The approval for listing the two ETFs was made after the signing of a side letter to a bilateral memorandum of understanding (MOU) on the cross-listing of ETFs by Hong Kong's Securities & Futures Commission (SFC) and the FSC in May.

BOCI-Prudential Asset Management's W.I.S.E.-CSI 300 China Tracker will be cross-listed in Taiwan through a feeder fund structure of Polaris International Securities Investment Trust. W.I.S.E.-CSI 300, being a sub-fund of BOCI-Prudential's W.I.S.E. ETF series, was the first Hong Kong ETF approved by the Taiwan Financial Supervisory Commission for cross-listing in Taiwan. That ETF tracks the performance of the top and most liquid 300 stocks on the Shanghai and Shenzhen markets. In Taiwan, the ETF will be named W.I.S.E. Polaris CSI 300 Securities Investment Trust Fund.

Shortly after that, meanwhile, Polaris Securities (Hong Kong) will be the first to cross-list a Taiwan ETF to Hong Kong by listing its Polaris Taiwan Top 50 Tracker Fund (HK) on the Hong Kong Stock Exchange on August 19. The Polaris Taiwan Top 50 Tracker Fund tracks the performance of the Taiwan 50 Index, which is made up of the top 50 blue-chips in that market.

Under the terms of the side letter to the MOU, ETFs listed on the Hong Kong or Taiwan stock exchanges and managed by asset managers licensed respectively by the SFC or the FSC will be mutually recognised in each other's jurisdiction for the purpose of cross-listings and offerings.

That MOU was entered into by the two financial regulators as far back as 1996. So far under the terms of the side letter, 16 ETFs listed in Hong Kong and 11 ETFs listed in Taiwan are qualified to cross-list in the other jurisdiction. The side letter is also expected to strengthen regulatory cooperation between the SFC and the FSC, in particular arrangements relating to information sharing and confidentiality regarding management of ETFs.

HSBC Global Asset management CEO Rudolf Apenbrink says he expects ETFs to continue to grow in popularity in Asia because of their cost effectiveness in accessing specific markets and sectors, convenience in trading and diversification benefits.

"We see a growing trend of local investors diversifying their portfolios into global markets. The cross-listing regime will open up more opportunities for local investors to engage in overseas investments and further facilitate liquidity flows into Taiwan," says HSBC Global Asset Management (Taiwan) CEO Andrew Chen.

Except for being denominated in the New Taiwan dollar, the Hang Seng Index ETF and the Hang Seng H-Share Index will be traded in the same way as in Hong Kong with a minimum board lot size of 100 units and 200 units respectively, which are lower than the minimum size of 1,000 units applicable to other stocks in Taiwan. The local daily limit of 7% on stock price movements will also be removed.

HSBC Global Asset Management (Taiwan) set up its business in Taiwan eight years ago with an expertise in emerging market investments, particularly the Greater China region. It launched Taiwan's first on-shore Chinese equity fund, HSBC Greater China Equity Fund, in March 2009; the first BRIC fund in 2005; and the Taiwan Fund, the world's largest Taiwan equity closed-end fund listed on the New York Stock Exchange in December 1986.