Published: 20:29, November 5, 2024 | Updated: 20:50, November 5, 2024
Hong Kong’s ETF industry reaches $60b milestone
By Luo Weiteng
The Acting Secretary for Financial Services and the Treasury Joseph Chan delivers a keynote speech at the HKEX ETF Summit 2024 on Nov 5, 2024. (PHOTO / HKSAR GOVERNMENT)

The operator of the Hong Kong stock exchange is betting on its decades-long thriving exchange-traded funds business to entrench its status as superconnector between the vast Chinese mainland market and far-flung international markets.

“Some 25 years on from the listing of our very first ETF, Hong Kong has become one of the most dynamic and innovative ETF marketplaces in the nation,” Wilfred Yiu Ka-yan, deputy CEO of Hong Kong Exchanges and Clearing, said his opening remarks at the HKEX ETF Summit 2024 in Hong Kong on Tuesday.

The event is paid tribute to the 25th anniversary of the city’s ETF industry, which currently offers nearly 200 ETF products with a total market capitalization of $60 billion.

READ MORE: First ETF tracking HK-listed SOEs makes trading debut

The summit comes on the heels of the listing of two ETFs tracking Hong Kong stocks in Saudi Arabia in October, as the financial hub eyes an active role in the China-Middle East corridor and launched Asia’s first ETF tracking Saudi equities last November.

Yiu hailed the inclusion of ETFs under the Stock Connect program in 2022 that allowed Chinese mainland and Hong Kong investors to trade eligible ETFs listed on each other’s market through their local brokers as a “milestone”.

The ETF Connect has been experiencing what Yiu described as “a very steady growth trajectory” and timed its takeoff in 2024 with measures to extend mutual access between Chinese mainland and Hong Kong capital markets, raising the total number of eligible ETFs to more than 240 in July.

In October, ETF trading volumes on Southbound Connect amounted to HK$3.3 billion ($424.6 million), while Northbound trading was HK$5.8 billion, according to Yiu.

Such data offers a glimpse of the significant development of the Stock Connect, whose Southbound trading has brought a net inflow of over HK$3.4 trillion to Hong Kong’s stock market, Acting Secretary for Financial Services and the Treasury Joseph Chan Ho-lim said in the keynote speech.

“Meanwhile, the Northbound trading has been an important avenue for international investors to access the Chinese mainland market. Some 70 percent of the A-shares held by international investors were acquired via this channel. This unique connectivity Hong Kong enjoys is increasingly recognized and favored by investors,” Chan said.

The city launched its first ETF, Tracker Fund, in 1999, at a time when the region was licking its wounds following the Asian financial crisis two years earlier. But the listing turned out to be the largest in Asia outside of Japan at the time of the launch, raising HK$33.3 billion from over 180,000 retail investors and institutions.

READ MORE: First batch of 10 ETFs tracking CSI A500 starts trading

Howard Lee Tat-chi, deputy chief executive of the Hong Kong Monetary Authority, recalled the hard road Hong Kong has traveled to forge its reputation as a premier ETF hub.

“Sometimes despite getting off to a bumpy start, you can still end up creating something impactful,” Lee told a panel discussion during the summit.

In the first three quarters of 2024, the average daily turnover of ETFs in Hong Kong reached HK$13 billion, 10 percent up from the average in the full year of 2023, and 32 percent up from the average in the full year of 2022 respectively.

 

Contact the writer at sophialuo@chinadailyhk.com