Flows Spike in Asia ETF Market

November 8th at 7:57am by Tom Lydon

The exchange traded fund business in Asia has seen new inflows of $5.5 billion plus, thanks to recent regulatory changes that have created an opening. This follows a $1.42 billion inflow of new assets seen in September for the Asian ETP industry, confirming the trend.

Debbie Fuhr, a partner at ETFGI, said regulatory changes in China in recent months had made it easier for both foreign investors seeking exposure to the country and domestic investors, reports Sarah Krouse for Dow Jones Newswires. [China ETFs: Wolrd Bank Cuts Growth Outlook for East Asia]

A major game changer allowed Hong Kong subsidiaries of mainland asset managers to launch products that offer investors access to mainland China ‘A’ shares. A-shares are renminbi-denominated shares that are traded on the Shanghai and Shenzen stock exchanges for mainland Chinese investors. The newly launched physical ETF products differ from many mainland products.[ETF Boom Predicted in Asia]

Another rule change gave equities the go-ahead to trade on multiple exchanges, instead of tied to just one, giving greater flexibility to equity funds. [ETF Market Heats Up in Asia]

“If you look at the history of ETFs for the first 11 years, it was all equity benchmarks. I think it’s the natural evolution of the market that most of the products start out being on equity benchmarks that people know and understand, and then they migrate to other asset classes as investors become more comfortable,” Fuhr said.

Furthermore, about 90% of the new $2.6 billion in inflows into emerging markets was via an ETF. Godfrey Obioma for Business Daily Online reports that Asia ex-Japan inflows saw the most growth in the region, from $310 million to $1.2 billion.

The renewed interest in Asia can be viewed as the opposite of the total global economic picture. In other regions of the globe, net inflows dragged in October, slowing to $13.5 billion, according to ETFGI data.

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Tickers