Asia ETF Roundup (Industry) – October 2014

It is absolutely vital that local investors understand how these products function before using them. Specifically, it is critical to have a thorough understanding of (1) the products themselves and (2) the concept underlying their mechanics (in particular the concept of “volatility drag”); as they are far more complex than traditional, un-leveraged ETFs. For more details, please read our article “New in Taiwan: Leveraged and Inverse ETFs”

New ETF Provider and ETFs Coming to Hong Kong
According to the Hong Kong SFC website, BMO Global Asset Management received authorization from the SFC to launch three ETFs on the Stock Exchange of Hong Kong, namely the BMO Hong Kong Banks ETF (03143), the BMO Asia USD Investment Grade Bond ETF (03141) and the BMO Asia High Dividend ETF (03145). This would mark the Canada-based ETF provider’s entrance to the Hong Kong ETF market.

Shanghai-Hong Kong Stock Connect Delays
In April 2014, the Hong Kong Securities Commission (SFC) and the China Securities Regulatory Commission (CSRC) announced the launch of the Shanghai-Hong Kong Stock Connect, a programme that would allow Hong Kong investors to trade certain stocks listed on the Shanghai Stock Exchange and mainland investors to trade certain stocks listed on the Stock Exchange of Hong Kong (HKEx), with a quota limit. It was previously announced that the formal launch of the Stock Connect would be in six months, i.e. October 2014. However, according to an announcement by the HKEx on 26 October, a formal approval for the launch of Stock Connect was not received by the HKEx and there was no firm date for its implementation.

RQFII ETF Watch – Outflows of Rmb 4.0 billion from RQFII ETFs

In October, RQFII ETFs recorded net outflows, estimated at Rmb 4.0 billion (6.5% of beginning and 6.1% ending AUM), after Rmb 17 billion of estimated total net inflows over the 3 months in July to September, and compared to Rmb 0.3 billion of net inflows in the previous month. The majority of the net outflows came from the Bosera FTSE China A50 Index ETF (82832 & 02832), estimated at Rmb 1.2 billion, followed by the ChinaAMC CSI 300 Index ETF (83188 & 03188), estimated at Rmb 1.1 billion.

The largest A-Share ETF by AUM in Hong Kong, iShares FTSE A50 China Index ETF (02823), recorded net outflows estimated at Rmb 2.4 billion during the month, after total estimated net inflows of Rmb 8.5 billion in the past 3 months and compared to Rmb 1.9 billion of net inflows in September.

New Launches and Listings           

Yuanta Lists a Pair of Leveraged and Inverse ETFs
On 31 October 2014, Yuanta Funds listed a leveraged and an inverse ETF on the Taiwan Stock Exchange. The ETFs, namely the Yuanta Daily Taiwan 50 Bull 2X ETF (00631L) and Yuanta Daily Taiwan 50 Bear -1X ETF (00632R) offer leveraged (2x) and inverse (-1x) exposure, respectively, to the daily return of the FTSE TWSE Taiwan 50 Index.

The listing of this ETF put the total number of ETFs listed in Taiwan at 23.                   

List of ETFs Launched in October 2014