Two years after launching them, HSBC is to close all but one of its Hong Kong-listed exchange-traded funds (ETFs). Investors will vote on the proposed closures of the MSCI Golden Dragon ETF, MSCI Hong Kong ETF, MSCI China ETF and MSCI Taiwan ETF later this month.
A spokesperson for HSBC Global Asset Management, which is the investment adviser for the ETFs, told Asia Asset Management: “HSBC is not closing its ETF business in Asia – we are still managing and will continue to manage the ABF Hong Kong Bond Index Fund in Hong Kong, the first ever bond ETF in Hong Kong launched in June 2005. We also have ETF offerings in other markets including Europe.”
In a notice to shareholders, HSBC said it proposed the de-listings because of the funds’ “relatively small” level of assets and trading volumes. All four funds had assets of HK$312 million (US$40 million) or less as of August 13.
Similarly, in late 2011, Lyxor International Asset Management decided to delist 12 synthetic ETFs from the Hong Kong market after deciding the levels of assets under management and trading volume were too low.
William Chow, managing director of Value Partners, points out to Asia Asset Management that although Hong Kong is one of the largest ETF hubs in the Asia, with more than 100 ETF products and over 20 ETF providers, the industry landscape is very fragmented and some Hong Kong-listed ETFs suffer from very low turnover.
HSBC’s spokesperson said: “Having taken into account the relevant factors including interests of the investors as a whole, HSBC is of the view that the proposed termination would be in the best interests of the investors in the ETFs.”
The spokesperson goes on to say that HSBC Global Asset Management, as the core investment management business within HSBC, adopts a stringent investment process including evaluating product suitability and constantly reviews its fund offerings and structures, and is committed to providing customers with world class, tailored solutions which align with their wealth objectives and risk profiles.
Furthermore, the spokesperson notes: “HSBC Global Asset Management regularly reviews all its products and capabilities to ensure they continue to align with client needs and business objectives. Key criteria include assets under management, profitability, sales interest and commitment, and scalability.”
HSBC has no immediate plans to launch additional products in Asia, the spokesperson added.