Hong Kong sees more specialised ETFs

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Ping An has listed two factor-based products and will be launching more, while CICC will introduce an ETF this week.

Ping An of China Asset Management in Hong Kong has listed the Ping An MSCI China Multi-Factor and the MSCI China Quality Factor ETFs on 30 November, according to records from Hong Kong Exchange.

The China Multi-Factor product will track the performance of the MSCI China Diversified Multiple-Factor Index, which has 64 constituent stocks, according to the firm’s website.

The index aims to maximise exposure to four factors, which are value, momentum, quality and low size, while maintaining a risk profile to that of the underlying parent index, which is the MSCI China Index, according to a document from the index provider.

Meanwhile, the China Quality Factor ETF will track the performance of the MSCI China Quality Index, which has 25 constituent stocks, according to Ping An’s website.

The index aims to provide the performance of quality growth stocks by identifying stocks with high quality scores based on three main fundamental variables: high return on equity, stable year-over-year earnings growth and low financial leverage, according to an MSCI document.

The firm manages two other ETFs, according to data from the exchange:

–The Ping An of China CSI 5-10YR CGB ETF, which has RMB 235.7m ($33.9m) in assets.

–The Ping An of China CSI HK Dividend ETF, which has HK$885.7m ($113.2m) in assets.

Future product launches

The firm is also expected to launch two more ETFs, which are the Nasdaq 5HANDL ETF and the Ping An Nasdaq AI and Robotics ETF, according to records from the Securities and Futures Commission, which did not provide an actual date for the launch.

The Nasdaq 5HANDL ETF will track a diversified multi-asset portfolio of ETFs, while the AI and Robotics ETF will track the performance of companies engaged in AI and robotics segment of the technology, industrial, medical and other sectors, according to Nasdaq’s website.

Separately, China International Capital Corporation will list its CSI Select 100 ETF on Wednesday, according to the Hong Kong Exchange website. Its index, the CSI CICC Select 100 Index, is designed to select 100 A-share companies with high and stable ROEs, high dividend yields and high earnings growth rates, according to a CSI document.

The firm manages one ETF, the CICC Krane Shares CSI China Internet Index ETF, which has $7m in assets, according to the exchange.

Different products?

The product launches will be competing in a very concentrated market, with only 26 out of at least 110 ETFs in Hong Kong that have gathered assets of $100m or more, according to data from the Hong Kong Exchange. Furthermore, those 26 ETFs account for 96% of Hong Kong’s $41bn ETF market.

However, there is still room for players to compete, especially for those who will be providing more specialised ETFs, such as thematic and smart beta products, according to Deborah Fuhr, London-based managing partner at ETF research and consulting firm ETFGI.

“In gaining traction, it is hard to be a ‘me too’ player, even if you offer lower costs, because it’s hard to get people to switch,” Fuhr said.

Echoing Fuhr, Rebecca Sin, head of ETF sales trading for Asia at Commerzbank, said separately that smaller ETF players can be successful in a very consolidated market.

“You have more sector-specific or ETF issuers that really create unique products that cater to investors. In Asia, there is also sufficient demand to invest in different products, so there is still a lot of growth potential in the region,” she said.

Other ETF providers have begun to launch more unique products, such as Premia Partners, which launched the first Asean-focused ETF in Hong Kong in August. Premia Partners is relatively new in the market, first launching its two China-focused smart beta ETFs in October last year.

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