The SFC decided after the review to include broad-based Hong Kong equity indices, as well as non-equity indices on a case-by-case basis for the L&I products, it said in a circular released last week.
These ETFs use derivatives to amplify the returns, with leveraged products doubling the daily performance of the index, while the inverse ones allow 1x inverse of the daily movement.
However, “at this stage, the SFC has no plan to accept applications for L&I products tracking mainland indices”, it noted.
Hong Kong Exchanges and Clearing head of exchange traded products Brian Roberts said in the statement that the extension marked “a further step towards Hong Kong becoming the Asian hub for ETP investing”.
Since June, the regulator has so far approved six pairs of L&I ETFs tracking foreign equity indices. Issuers include Samsung Asset Management, CSOP Asset Management, China Asset Management as well as Mirae Asset Global Investments.
They have gathered assets totalling HK$530m ($68.3m) as of December 23, according to data compiled from the local bourse. Assets under management for each product range from the lowest HK$12m (Mirae Asset Horizons Topix Daily (-1X) Inverse Product) to HK$128.7m (ChinaAMC Direxion NASDAQ-100 Daily (-1x) Inverse Product).
Still, as of November, the L&I products represent about 0.2% of the overall ETF market in Hong Kong, according to HKEx’s monthly report.
While big ETF managers such as iShares, Vanguard and Amundi said they have no interest in issuing L&I products in the SAR, smaller firms show great interest in capturing the potential growth seen in the Taiwan and Korea markets, according to research firm Cerulli Associates. Other interested parties include Value Partners and EIP.
There are already L&I ETFs tracking Hong Kong’s benchmark indices (Hang Seng Index (HSI) and Hang Seng China Enterprises Index (HSCEI) listed in Taiwan, Korea, Japan and Europe, according to index compiler Hang Seng Investments.
In Taiwan, Fubon Asset Management launched a pair of L&I products tracking the HSCEI in August this year.
In Korea, Samsung AM has listed one leveraged ETF of HSCEI in 2014, although there’s no corresponding inverse product.
