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Commerzbank to delist ETFs in Hong Kong

Downward pressure on markets in Germany and Hong Kong left little hope that the index-tracking products would gather more assets.

Luxembourg-based asset manager Commerz Funds Solutions has applied to the Hong Kong Exchange to delist two passive products that track Germany’s DAX index, the ComStage 1 DAX UCITS ETF and DivDAX UCITS ETF, according to HKEX’s website.

The expected last trading day of the two products on HKEX will be on 14 February 2020.

The Hong Kong units of the passive products, launched in 2016, each have roughly €5m ($6.13) in assets.

The move may be linked to Commerzbank’s 2018 sale of equity market and commodities operations to Societe Generale, which owns Lyxor. Part of the sale was Commerz Funds Solutions, which was transferred to Lyxor in May 2019, according to the firm’s website.

Lyxor has made a full withdrawl from retail fund distribution in Hong Kong, FSA previously reported.

Strong headwinds

Hong Kong has 114 SFC-registered ETFs. A lack of differentiation has usually been behind delistings, and the pulled products have often been similar China A-shares index trackers.

But with the Commerzbank de-listings, only one Germany index-tracking fund will remain: the locally-domiciled iShares DAX Index ETF. Also launched in 2016, the product has only €3.3m in assets – less than the two Commerzbank products.

According to a Hong Kong Exchange filing, in making the decision to de-list, management considered “various factors, including the low net asset value of the Hong Kong units”.

The “various factors” may have been a reference to increasing headwinds in Germany and Hong Kong, which do not bode well for the markets.

Germany’s slumping GDP growth was -0.1% in the second quarter and the central bank warned the economy is likely sliding into a recession.

In Hong Kong, negative market sentiment is driven by two listed heavyweights, HSBC and Cathay Pacific, both of which had CEO resignations in August after facing the wrath of mainland authorities.

HSBC is believed to be in China sights for providing information to the US government that helped build a case against Huawei Technologies chief financial officer, who was arrested earlier this year.

Cathay is under fire because some employees expressed sympathy with the Hong Kong protestors. Cathay was forced to ban certain crew members from flying to the mainland, and management went further, firing staff, issuing internal warnings to employees and making an apologetic public statement clarifying that the airline supports the government and police in their conflict with the protestors.

Moreover, Alibaba’s planned $15bn listing in Hong Kong has reportedly been postponed due to the SAR’s social unrest, according to a Reuters report.

In 2019, negative investor sentiment is weighing on the volatile Hang Seng Index

Source: FE. In US dollars, year to 21 August.

Part of the Mark Allen Group.