Hong Kong ETF Market Faces Headwinds

The exchange traded products industry continues to grow, but not every country where ETPs trade is seeing the exponential growth that the U.S. seen.

Over the years, there has been ample talk of too much supply in the U.S. ETP market, but the number of exchange traded funds and exchange traded notes has grown to almost 1,600 while combined U.S. ETP assets under management have swelled to $1.7 trillion. Last year was a record year of U.S. inflows as flows topped $200 billion for a second consecutive year. [Record ETF Inflows in 2013]

The industry has not been as fortunate in Hong Kong where an overwhelming number of “me too” ETFs is stifling AUM growth and chasing some large issuers from the market.

Although the number of ETFs in Hong Kong has grown, the bulk of those funds only offer access to Hong Kong-listed shares or A-shares trading on exchanges in mainland China. [Investors Cool on A-Shares Move to EM Index]

In fact, an average of one new A-shares ETF comes to market every month in Hong Kong, according to the South China Post. Combine a glut of products and the slack performance of A-shares, which trade in Shanghai and Shenzhen, and the amount invested per Hong Kong-listed ETF is on the decline, the paper reports.