BlackRock’s exchange-traded funds arm, iShares, is about to list six products in Hong Kong offering exposure to international equity markets, but does not intend to launch leveraged and inverse ETFs, which were recently given the green light in Hong Kong.
The new products will launch on June 29 and physically replicate six indices: the Nasdaq 100, Germany’s Dax, Euro Stoxx 50, FTSE 100, Kospi 200 and MSCI Taiwan. They will incorporate US dollar and renminbi counters for the first time in Hong Kong.
Management fees will be between 20 and 30 basis points, in line with their cheapest rivals. iShares' Nasdaq product charges 28bp, while the only other Nasdaq ETF listed in Hong Kong, from BMO Global Asset Management, has a fee of 30bp. Mirae Asset's Horizons business offers a Kospi ETF at 29bp, while iShares charges 30bp on its Korean product. The fee on the iShares Taiwan ETF is 30bp, as against EIP's Xie Shares charge of 39bp and HSBC Global Asset Management's fee of 99bp for their Taiwan ETFs. There are not yet any other Hong Kong-listed FTSE funds.
While investors may find locally listed ETFs in Europe and the US slightly cheaper, the ease of access to these markets from Hong Kong is the key attraction, said Susan Chan, Asia head of iShares.
iShares has no plans to cross-list them elsewhere in the region, and she did not comment on why it did not intend to launch L&I products. The latter types of ETFs have raised concerns among both regulators and wealth managers, who have stressed the importance of investor education.
Meanwhile, Chan said iShares had seen an increase in the use of ETFs by wealth managers in Asia, particularly for tactical portfolio tilting and cash management. “Our studies show that two-thirds of wealth managers now use ETFs in their client portfolio strategies,” she noted.
Moreover, the number of robo-advisers – automated portfolio management services based on algorithms – is growing, and such platforms tend to make substantial use of ETFs.
But demand for Hong Kong-listed ETFs has fallen since last year, with total assets under management standing at $35 billion as of the end of May, down from $42 billion at end-2014 and $37 billion at end-2015 (see graph).
Meanwhile, investors wanting exposure to Japanese indices using iShares ETFs would need to buy them on the Japanese market. iShares uses three Asia-Pacific centres – Tokyo, Sydney and Hong Kong – as its ETF listing hubs, and has no Japan- or Australia-focused ETFs listed in Hong Kong.