South Korea’s Mirae Asset has listed seven exchange-traded funds in Hong Kong, making it the third biggest provider in the territory by number of ETFs, after Deutsche Bank's db X-trackers and BlackRock's iShares.
Mirae launched its first ETF in Hong Kong in January last year, and the latest move gives it an eight-strong range of physically backed products and further underlines its international ambitions following its acquisition last year of Canadian ETF provider BetaPro.
Yet this is a scale business, and while Mirae is a major player in the Korean ETF market, it has some way to go to challenge the biggest providers in Asia, let alone globally.
Still, the launch highlights the firm’s commitment to the Hong Kong market, says Roger Liu, Mirae’s Hong Kong head of ETFs. He adds that the firm’s ETF focus will remain strongly on institutional clients, which comprise well over 80% of its ETF customer base.
The move also reinforces the suggestion that the floodgates may be opening for ETF approvals, given that the Securities and Futures Commission this month approved its first swaps-based ETFs for 18 months.
Mirae's new ETFs, authorised on January 5, use Standard & Poor’s indices to provide exposure to seven sectors/themes. One references global consumer brands, and the other six focus on Asia ex-Japan sectors: consumer, financials, IT, industrials, energy and materials. They cover 10 countries: China (non-A shares), Hong Kong, India, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan and Thailand.
Of course, having a wide range of ETFs is no guarantee of success, as was shown by Lyxor Asset Management’s recent delisting of its entire 12-strong range from the Hong Kong exchange, in news broken by AsianInvestor. This highlighted the difficulty – even for a provider like Lyxor that is well established in Europe – of building scale in new markets, as has been noted by AsianInvestor in past articles.
Indeed, Mirae Asset remains well behind the biggest providers in Asia – and globally – in terms of ETF assets under management. As of September 30, it was the ninth biggest provider by AUM of Asia-Pacific ex-Japan-listed ETFs with $1.1 billion. State Street Global Advisors leads the regional pack with $11.3 billion.
But Liu says Mirae has a track record of emerging from being a local Korean player into an international emerging-markets specialist. He adds that the firm now has more than 130 ETFs listed across four markets: Australia, Canada, Hong Kong and South Korea.
Moreover, Liu argues that taking a sector-based approach with the new products is innovative and makes sense in volatile markets.
Investors in Asia tend to focus on overall Asia ex-Japan indices rather than on individual sectors, he says, and moreover there are not many products available providing Asian sector-focused exposure. And since sector rotation is a commonly used strategy for tackling volatile markets, and emerging countries are likely to be growth drivers going forward, such ETFs should be available, adds Liu.
He points out that while the S&P 500 index ended flat for 2011, if one broke it down into 10 main sectors, only three (financials, industrials and materials) posted negative returns for the year. Hence careful sector selection and rotation could have generated a positive result.
Some ETFs, such as sector funds, can be traded more frequently than long-term plays like mutual funds, so investors need to do their homework very carefully before making an investment decision, adds Liu.
Woong Park, Hong Kong chief executive of Mirae Asset since January 2011, says the firm has built its ex-Korea product-manufacturing centre in Hong Kong. The city-state is the gateway to China, which in turn is the main driver and heart of emerging-market growth, he argues. Excluding operations staff, there is a five-strong ETF team in the SAR, covering investments and sales.
Asked whether the firm is likely to establish a presence in Singapore, Park says nothing is on the cards at present, but that he would not rule it out in future. One major aim at present, he adds, is to boost the number of Europe-based clients using Mirae Asset’s ETFs.