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Asia ETF Roundup (Industry) – March 2019

HK allows 2x inverse products; HK-domiciled offshore Chinese equity ETFs see net outflows of USD 374 million.

Jackie Choy, CFA 04/04/19

For economic and market news relating to Asian ETFs, please refer to our “Asia ETF Roundup (Market) – March 2019”.

ETF Industry News

Two Times Inverse Products Allowed in Hong Kong

On 14 March 2019, the Hong Kong Securities and Futures Commission (SFC) issued a supplemental circular setting out requirements for leveraged/inverse products structured as ETFs to be offered in Hong Kong. Key amendments to the L&I Products Circular are as follows:

  • The leverage factor cap of inverse products is relaxed to two-time (2x). Thus, the caps on leverage factor for these leveraged/inverse products are 2x, -2x respectively.
  • SFC will also accept applications for L&I Products tracking commodities indices on a case by case basis where there is no potentially outsized impact from roll costs on the performance of the products.

 

HK SFC Delays Effective Date for Online Platform Guidelines and Offline Requirements for Complex Product to 6 July 2019

On 19 March 2019, the Hong Kong Securities and Futures Commission (SFC) announced it would push back the effective date of its new online platform guidelines and offline requirements for complex product sales by three months to 6 July 2019. These include the Guidelines on Online Distribution and Advisory Platforms and new paragraph 5.5 “Know your client – complex products” of the Code of Conduct. Recall that the Guidelines include additional protective measures applicable to the distribution of complex products on online platforms and paragraph 5.5 of the Code of Conduct further set out that the additional protective measures will also apply to the sale of complex products in an offline environment.

Under the Guidelines, “complex products” refers to an investment product whose terms, features and risks are not reasonably likely to be understood by a retail investor because of its complex structure. Specifically, synthetic ETFs, futures-based ETFs and leveraged/inverse products authorized by the SFC and traded on the Stock Exchange of Hong Kong are classified as “complex products - traded on an exchange”. Unauthorized funds classified as derivative funds which are listed in specified jurisdiction (included the U.S. and many Asian/European countries) are also classified as “complex products - traded on an exchange”. Under paragraph 5.5, when investors purchase a complex product which are also derivative products traded on an exchange in Hong Kong or in a specified jurisdiction without a solicitation or recommendation, a licensed or registered person is not required to comply with paragraph 5.5(a) (the need to ensure the suitability of a transaction in a complex product, to provide information about a complex product and to provide warning statement), but must still comply with paragraphs 5.1A (knowledge assessment) and 5.3 (Know Your Client: derivative products).

Chinese Equity ETF Watch – HK-Domiciled Offshore Chinese Equity ETFs See Net Outflows of USD 374 million while Onshore Chinese Equity ETFs See Small Net Inflows

  • Hong Kong-domicilied ETFs in the China Equity Category saw estimated outflows of USD 374 million,  coming mainly from the Hang Seng China Enterprises ETF (02828). Meanwhile, ETFs in the China Equity – A-Shares Category saw small estimated inflows of USD 69 million.
  • In the U.S. in March, we saw an estimated USD 67 million of net outflows from the iShares China Large-Cap ETF (FXI) and the iShares MSCI China ETF (MCHI) and estimated USD 486 million of net inflows into the Xtrackers Harvest CSI 300 China A ETF (ASHR).

 

 

New Launches and Listings

AXA-SPDB, Fullgoal, ICBC Credit Suisse and PingAn Listed 4 ETFs in China

During March, AXA-SPDB, ICBC Credit Suisse and PingAn Fund Management listed 3 ETFs on the Shanghai Stock Exchange. These ETFs track the CSI High Dividend Yield Select Index, the SSE 50 Index and the China Bond - Medium-High Grade Corporate Bond Spread Factors Index, respectively. 

On 26 March, Fullgoal Fund Management listed an ETF on the Shenzhen Stock Exchange. The ETF tracks the Hang Seng China Enterprises Index.

These listings put the total number of ETFs listed in China at 201 (56 ETFs on the SZSE, 145 ETFs on the SSE).

Cathay, Fuh Hwa and Fubon Listed 8 Bond ETFs in Taiwan

On 7 March, Cathay Securities Investment Trust listed three ETFs on the Taipei Exchange. These ETFs track the Bloomberg Barclays US 15+ Year Technology Select Index, the Bloomberg Barclays US 15+ Year Utility Select Index and the Bloomberg Barclays US 7-10 Year Banking Select Index, respectively.

On 20 March, Fuh Hwa Securities Investment Trust listed three ETFs on the Taipei Exchange. These ETFs track the Bloomberg Barclays US 20+A3 or Better Corporation Bond Liquid Index, the Bloomberg Barclays US 1-5 Year Credit Select Index and the Bloomberg Barclays US 8+ Year Financial Subordinate Index, respectively.

On 27 March, Fubon Asset Management listed two ETFs on the Taipei Exchange. These ETFs track the FTSE World Broad Investment-Grade USD Bank Bond 10+ Years Index and the FTSE Asian Broad Bond Index – China, Investment-Grade, respectively.

These listings put the total number of ETFs listed in Taiwan at 170.

BMO Added USD Counters to 2 ETFs in Hong Kong

On 11 March, BMO added USD counters to two of their ETFs on the Stock Exchange of Hong Kong. These ETFs track the NASDAQ 100 Index and the Bloomberg Barclays Asia USD IG Bond Index, respectively.

These listings put the total number of ETF listings in Hong Kong at 199 (131 ETFs, 68 multiple counters, including 22 L&I Products).

UTI Listed an ETF in India

On 12 March, UTI Asset Management listed an ETF on the Bombay Stock Exchange. It tracks the S&P BSE Sensex Next 50 Index.

KB Asset Management Listed an ETF in South Korea

On 19 March, KB Asset Management listed an ETF on the Korea Exchange. It tracks the KRX300 USD Futures Balanced Index.

These listings put the total number of ETFs listed in Korea at 421.

ETFs Launched in March 2019 in the Asia ex-Japan Region

 

 

About Author Jackie Choy, CFA

Jackie Choy, CFA  

Jackie Choy, CFA is the Director of ETF Research for Morningstar Investment Management Asia