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E Fund and Yuanta partner for inverse ETF

The two firms partnered to launch in Hong Kong an inverse ETF tracking the Hang Seng Index, following four other issuers.
Fund Selector Asia

Last week, China Asset Management, CSOP Asset Management, Mirae Asset Global Investments and Samsung Asset Management also launched leveraged and/or inverse ETFs tracking the HSI and the Hang Seng China Enterprise Index – a total of 16 products.

The E Fund Yuanta Hang Seng Index Daily (-1x) Inverse Product aims to replicate the opposite of the HSI daily performance by using futures. The annual estimated ongoing charges are 1.5%, with an average daily tracking difference expected to be -0.01% a year, similar to the others.

E Fund Management Hong Kong assistant portfolio manager Ethan Chan said the two firms will focus on developing leveraged and inverse (L&I) products at this stage. Future plans include those tracking commodities such as gold and oil, and the leveraged version of the HSI, although no timeline was given.

“We hope to strengthen investor education on these kind of products first before launching more,” he told FSA.

High net worth investors can make use of the product for short-term trading, while institutional investors who do not have expertise in managing futures can also use the inverse ETF as a hedging tool, Chan said.

The cooperation leverages on Taipei-baed Yuanta’s experience in L&I products in Taiwan. The firm has used technical advice from Taiwan for the new Hong Kong product, he noted.

Yuanta has 13 L&I ETFs listed in Taiwan, tracking equity indices in Taiwan, US and China, as well as commodities including oil and gold. There are also L&I products focusing on forex that track the US dollar index and the US 20-year treasury.

In 2009, the Taiwanese firm launched in Hong Kong the Yuanta/P-shares Taiwan Top 50 ETF, but the product was delisted in September last year due to low net asset value (about HK$9.7m or $1.25m) and low trading volume. It has no other ETFs listed in Hong Kong.

E Fund, which is based in Guangzhou, has been selling three ETFs in Hong Kong: The Citi Chinese Government Bond 5-10 Years Index; the CSI 100 Index for A-shares; and the CES China 120 Index that includes top 120 Chinese companies listed in the mainland and in Hong Kong.

Part of the Mark Allen Group.