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.
There are 10 ETFs trading in Hong Kong offering exposure to the CSI 300, which would be the equivalent of 10 S&P 500 ETFs in the U.S. Half of Hong Kong’s $32 billion ETF industry is invested in A-shares ETFs, according to the South China Post.
“There are 22 listed funds in Hong Kong that just deal in A shares, with 10 of those launched in the past two years,” the paper reports. All of those A-shares ETFs are making it hard for even the largest sponsors operating in Hong Kong to turn profits on those funds.
The U.S. is home to four A-shares ETFs, three of which offer physical exposure to the A-shares markets. The largest of those four is the db X-trackers Harvest CSI 300 China A-Shares Fund (NYSEArca: ASHR).
Hong Kong’s ETF market does have at least one similarity with the U.S.: Not all new ETFs introduced there are immediately successful. ETF sponsors in Hong Kong have introduced single-country funds tracking nations such as Vietnam, Pakistan and Bangladesh and sector plays as well, but some of those new ETFs have struggled to attract assets and volume, the South China post reported. [Some New ETFs Got Big in a Hurry]
ETF Trends editorial team contributed to this post.