Asian institutions are shunning fixed-income ETFs due to low liquidity and lack of product choice, hampering industry growth. Recent market volatility has exacerbated the situation.
Korea Investment Management is about to introduce the first synthetic exchange-traded fund to Korea.
The bank's db X-trackers unit is set to launch a suite of physically backed ETFs, but says its aim has always been to provide a supermarket selection and the move is not solely related to flows.
Lippo Investments Management awaits approval for its first exchange-traded fund, while db X-trackers expects to list more ETFs in Asia this year, and others look set to follow suit.
The combination of anaemic ETF trading volumes and rising funding costs means market-makers need to find a niche to survive in Asia’s heavily brokered markets.
They say the Singapore Exchange’s closing-price mechanism for ETFs can lead to portfolio mispricing, with the issue exacerbated by inactive secondary-market trading.