A stamp duty concession for ETFs was introduced in 2010, but it covered only those funds that track indices with less than 40% of Hong Kong constituent stocks. Since then, the exchange noted that the ETF listings in Hong Kong increased to 124 currently from 69 at the end of 2010.
Average daily ETF turnover has also increased substantially, rising to $4.7bn last year from $2.4 billion in 2010.
As a result, 26 of the 124 ETFs listed in Hong Kong are subject to stamp duty now, comprising roughly a quarter of total listed ETF turnover on the exchange, officials said.
The exchange added that the ETF contribution to HKEx’s securities market turnover nearly doubled to 6.9% last year from 3.5% in 2010.
The recently announced stamp duty waiver on all ETFs was proposed by the Hong Kong government in its budget in 2014 with the aim of reducing trading costs of the instruments.
“HKEx welcomes this initiative by the government and believes it will be another very positive development for Hong Kong as well as our financial markets,” said Charles Li, chief executive of the exchange.
“We had record ETF turnover last year and this change [stamp duty waiver] will make our ETF business even stronger.”
In Asia, the current distribution landscape and the commission-driven sales channels are major barriers to the develoment of the ETF market, noted PwC in a recent research note.
PwC projects the assets under management of global ETFs doubling to $5trn by 2020, with Asia offering fragmented opportunities.
Recent developments like the Stock Connect and the ASEAN fund passport could act as a catalyst for ETF growth in Asia.
With the opening of the Stock Connect, Rob Hughes, head of index and advisor solutions at Nasdaq, earlier told Fund Selector Asia there is big potential for exchange-traded funds in Hong Kong as well as in China.
In November, BMO Global Asset Management launched three Hong Kong-domiciled ETFs.
Prior to that, Vanguard unveiled three ETFs in Hong Kong in June, including the SAR’s first ETF providing investors with exposure to European equities.
A look at the one-year performance of the top five ETFs available for sale in Hong Kong:
ETFs that are now subject to stamp duty and will enjoy a stamp duty waiver from 13 February, as per the Hong Kong Exchange
| # | Name of ETF |
| 1 | Tracker Fund of Hong Kong |
| 2 | iShares MSCI China Index ETF |
| 3 | WISE – CSI HK Listed Mainland Consumption Tracker |
| 4 | Lippo Select HK & Mainland Property ETF |
| 5 | WISE – CSI HK 100 Tracker |
| 6 | Hang Seng H-Share Index ETF |
| 7 | Hang Seng Index ETF |
| 8 | Hang Seng FTSE China 50 Index ETF |
| 9 | WISE – CSI HK Listed Mainland Real Estate Tracker |
| 10 | CMS CSI Overseas Mainland Enterprises ETF |
| 11 | iShares MSCI Asia APEX Small Cap Index ETF |
| 12 | iShares MSCI Asia APEX 50 Index ETF |
| 13 | iShares MSCI Asia APEX Mid Cap Index ETF |
| 14 | Horizons MSCI China ETF |
| 15 | Value China ETF |
| 16 | Horizons S&P Asia ex JANZ Financials ETF |
| 17 | Ping An of China CSI HK Dividend ETF |
| 18 | Ping An of China CSI HK Mid Cap Select ETF |
| 19 | SPDR FTSE Greater China ETF |
| 20 | Horizons S&P Asia ex JANZ Energy ETF |
| 21 | Vanguard FTSE Asia ex Japan High Dividend Yield Index ETF |
| 22 | Ping An of China CSI RAFI HK50 ETF |
| 23 | Horizons Hang Seng High Dividend Yield ETF |
| 24 | E Fund CES China 120 Index ETF |
| 25 | BMO Hong Kong Banks ETF |
| 26 | BMO Asia High Dividend ETF |
