We ask Jacqueline Pang, Head of Capital Markets, Asia Pacific at State Street Global Advisors, and Jean-François Mesnard-Sense, Capital Markets Specialist at State Street Global Advisors, about the current landscape of ETFs in Hong Kong.
First of all, please tell us about your footprint in Hong Kong.
Jacqueline Pang: State Street Global Advisors currently has three local ETFs listed on the stock exchange of Hong Kong (SEHK) as well as the only US-domiciled ETF cross-listed on the SEHK, the SPDR Gold Shares (2840.hk). With the upcoming 20-year anniversary of the Tracker Fund of Hong Kong (2800.hk), the first ETF launched on the SEHK, State Street Global Advisors has established a local ETF presence since 1999. In the aftermath of the Asian financial crisis, State Street Global Advisors also partnered with 11 leading central banks to launch a regional local currency bond ETF (2821.hk) in 2005 which is the first and currently the largest fixed-income ETF in Asia to encourage the development of the bond markets in the region.
2018 has been a complicated year for most asset classes, how did your clients position themselves through your ETFs?
Jean-François Mesnard-Sense: Hong Kong is a singular market to analyse as most of the trading volume on the SEHK is concentrated on a handful of ETFs. Looking at the fourth quarter of 2018, the five most traded ETF listings represented more than 80% of the overall ETF turnover on the SEHK. Most traded ETF on the SEHK, with the Tracker Fund of Hong Kong taking 25%. Based on the ETF flows in both the primary and the secondary market in Hong Kong, we saw clients selling through the first three quarters of 2018 as tariff discussions were escalating between the US and China. We observed a change of dynamics in the fourth quarter of 2018 when buyers outnumbered sellers in both the secondary and primary markets (Chart 1).
Jacqueline Pang: A key focus is also to bring our global ETF platform to local investors. Currently, we have locally traded ETFs available for investors who want cost-effective and diversified exposure to Singapore or Hong Kong equities. We also have ETFs in the US or Europe for investors who want access to international markets. They can benefit from greater scale and efficiency than similar funds that are traded on local exchanges in Asia. In the aftermath of the tariffs being imposed onto China, we saw our local clients repositioning themselves through some of our US-listed ETFs. One of the most recurrent trades last quarter was an increased allocation to gold through the various listings of our SPDR Gold Shares.
The views expressed in this article are those of the author and may differ from the published views of Commerzbank Corporate Clients Research Department, the communication has been prepared separately of such department. No representations, guarantees or warranties are made by Commerzbank with regard to the accuracy, completeness or suitability of the data.