Listings of Exchange Traded Products (ETPs), including Exchange Traded Funds (ETFs) and Leveraged & Inverse (L&I) products, have seen a remarkable surge in Hong Kong this year. As at 16 September 2024, 28 new products have debuted, exceeding the total number of ETP listings in 2023 and taking the total number of ETPs to 192.
The pickup in listings has broadened the choices for investors and contributed to the liquidity of the Hong Kong ETP market – in August, the newly listed products accounted for HK$62.6 million of average daily turnover. In the following paragraphs we will introduce some of the new ETPs that are bringing new asset classes to the Hong Kong market.
New Products for Crypto and Tech Exposure
One of the standout additions is Asia’s first Bitcoin inverse product, which listed on HKEX in July, offering a new tool for investors to take advantage of the price movements of Bitcoin. Following the listings of Asia’s first batch of six Spot Virtual Asset (VA) ETFs in April, together with the three future-based VA ETFs listed in December 2022 and January 2023, market capitalisation of the Hong Kong VA ETF market has increased to over HK$3.2 billion as at the end of August, indicating positive reception from investors and strong potential for future growth. There are currently 10 VA ETPs available for trading at HKEX.
Meanwhile, Hong Kong’s thematic ETF sector continues to grow, with new ETFs focusing on AI and automation, digital payments, and Web3 coming onto the market. The thematic ETF segment, which was almost non-existent a few years ago, now has an average daily turnover exceeding HK$2.1 billion year to end-August and assets under management of HK$63.1 billion as at 31 August.
Access Growth Opportunities in Asia
Among the “firsts” in this year’s listings is an ETF that tracks China’s state-owned enterprises (SOEs). The ETF, which focuses on high dividend stocks of SOEs, covers various sectors such as energy, communication services, industry, utilities and healthcare. This listing underscores the significance of Hong Kong’s role as a “superconnector” serving as an international financing platform to attract more capital from across the globe and invest in high-quality Hong Kong-listed SOEs.
The Japanese market has also garnered significant attention this year. The Hong Kong ETF market has broadened its offerings with the introduction of broad-based Japanese equity ETFs and L&I products. Benchmarked on the Nikkei 225 Index and the TOPIX 100 Index. These additions provide investors with more options to capitalise on the fluctuations of the Japanese market.
Position for Next Interest Rate Cycle
From a macroeconomic perspective, the Fed’s rate cut cycle has been the focal point of the market. In tandem with this, the Hong Kong ETF market has seen an uptick in US Treasury ETF listings this year, including six new products that provide exposure to US Treasuries of various maturities; the last listing of US Treasury ETF was in 2019. The new listings arrive at an opportune moment, allowing investors to adjust their exposure in line with their predictions for interest rates and the broader market. Long-term bond ETFs are especially appealing for investors looking to capitalise on the potential for price appreciation in response to the anticipated rate cuts.
The surge in ETF listings this year has diversified investment choices in Hong Kong with innovative products such as the Bitcoin inverse product and thematic ETFs in tech. This reflects Hong Kong’s growing significance as a premier ETF hub in Asia, offering investors new avenues for growth and exposure to various asset classes.
