Four overseas-tracking ETFs launched by Canada’s second largest ETF provider, BMO Global Asset Management (BMO), made their IPO debuts on the Hong Kong Stock Exchange (HKEx) on February 18.
The four ETFs, namely the BMO NASDAQ 100 ETF, the BMO MSCI Asia Pacific Real Estate ETF, the BMO MSCI Japan Hedged to USD ETF, and the BMO MSCI Europe Quality Hedged to USD ETF, are all firsts for the Hong Kong market.
The listings come 15 months after the company released its first ETF series in Hong Kong in November 2014, namely the BMO Asia USD Investment Grade Bond ETF, the BMO Hong Kong Banks ETF, and the BMO Asia High Dividend ETF.
Speaking at the post-IPO press conference, Rajiv Rai Silgardo, co-CEO of BMO, commented that the Hong Kong ETF market has long been dominated by China’s A-shares and Hong Kong equity-related ETFs. As such, the availability of new products should help to broaden the spectrum in the territory’s ETF market.
According to figures from the HKEx, 66 out of 133 Hong Kong-listed ETFs were A-share equity and Hong Kong equity focussed in 2015, which accounts for 99.4% of average daily turnover.
“The Hong Kong ETF market is still fairly homogenous and tends to be dominated by products that focus on Greater China equity,” says Kevin Gopaul, head of ETFs at BMO. “Working with our local team, we’ve harnessed our global ETF expertise to deliver differentiated offerings that provide more investment options to regional investors who increasingly see the importance of diversification in a volatile market.”
On the low liquidity of non-Hong Kong and -China ETFs, Mr. Silgardo states that ETF providers, market makers and regulators should work together to enhance investor education.
Hong Kong’s Securities and Futures Commission (SFC) recently introduced a circular on the requirements of leveraged and inverse ETFs to pave the way for the launch of alternative ETFs.
Mr. Silgardo commented that exotic ETFs should have a place in certain massive portfolios but investors should be sophisticated enough to understand their structures. “We’re still working with the SFC and the HKEx to see how the authorities aim to facilitate the products.”
BMO currently offers more than 80 ETFs globally. The company had about US$237 billion in total AUM as at October 31, 2015.
