Hong Kong’s exchange-traded fund (ETF) market is experiencing a record-breaking year, fueled by a strong stock rally, the expansion of the Stock Connect program, and a wave of innovative products, including Asia’s first ETF linked to virtual assets.
Data from the Hong Kong Exchanges and Clearing (HKEX) reveals that net fund flows into the exchange-traded product (ETP) market, which includes ETFs as well as leveraged and inverse products, rose by 48% year-over-year to HK$46.7 billion in the first 10 months of this year. This growth has pushed the total assets under management (AUM) in Hong Kong’s ETP market to nearly HK$500 billion.
Daily ETF Turnover Reaches New Highs Amid Stimulus-Driven Rally
Average daily ETF turnover on the Hong Kong Stock Exchange hit a record HK$77 billion (US$9.9 billion) on October 8, as the market rallied following China’s aggressive stimulus measures to stabilize the property sector and support equities. These measures, introduced on September 24, have sparked renewed investor interest in Hong Kong’s ETFs.
The recent market volatility has also contributed to the surge in ETF trading, as investors look for efficient ways to respond to market fluctuations while awaiting additional stimulus measures from China.
Investors Turning to ETFs During Market Uncertainty
“During times of volatility, investors tend to favor ETFs,” said Jean-Francois Mesnard-Sense, head of exchange-traded products at HKEX. “They might lack the time for individual stock selection and prefer to respond swiftly to market developments, news, and movement through ETFs.” Mesnard-Sense noted that ETFs recently accounted for over 15% of overall cash market trading volume amid the increased activity.
ETFs Gain Popularity in Asia’s Rapidly Growing Markets
ETFs, which pool various securities to mirror market performance, are gaining significant traction in Asia, particularly in mainland China, one of the world’s fastest-growing ETF markets.
The Tracker Fund of Hong Kong, an ETF that follows the Hang Seng Index, is on track to become the most-traded security on the Hong Kong exchange this year, surpassing tech giant Tencent. As of October 22, the Tracker Fund saw average daily trading volumes of HK$8.2 billion, ahead of Tencent’s HK$7.7 billion.
Conclusion
Hong Kong’s ETF market is seeing robust growth due to a combination of favorable market conditions, new product offerings, and investor demand for simplified trading options during volatile times. This surge in ETF activity marks a significant milestone for Hong Kong’s financial landscape, reflecting the broader global trend of rising ETF adoption.
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