Along with the global market, Hong Kong was dealing with its own economic challenges in addition to inflation. However, its exchange-traded fund (ETF) market proved resilient in spite of the tumult.
“Amid a rout in the Hong Kong and mainland China stock markets last year, investors kept faith in many large Hong Kong-listed exchange traded funds committing about $10bn in net inflows even as losses mounted,” a Financial Times report said.
The report compared Hong Kong’s primary stock market indexes, the Hang Seng Index and the CSI 300 Index, both fell during last year’s tumult. The former witnessed a 15.5% drop while the latter saw a 21.6% drop.
In the meantime, the Hong Kong ETF market was steadfast in comparison. Versus the two aforementioned indexes, the ETF market was able to mute the volatile markets better.
“But the asset size of Hong Kong’s ETF market fell by much less than these two major indices, by only 10.5 per cent, to HK$384bn ($48.9bn) at end-December 2022, down from HK$428.67bn 12 months earlier, according to Hong Kong Exchanges & Clearing data,” the report said.
Re-Investable Once Again
Mainland China’s economy is starting to re-open again after a surge in COVID-19 cases, which should help jump start the economy again. That should flow over into Hong Kong, which should also see renewed investor interest.
“In 2022, the market had a lot of concerns on whether China was still investable,” said Katie He, Hong Kong-based head of product and strategy at ChinaAMC, in the FT report.
“Covid-related policies and regulations regarding the tech and real estate sector had a great impact on market confidence,” she added.
As China backs off from its regulatory measures on tech and the real estate market works through its doldrums, global investors are willing to invest in China and its surrounding areas again. That should intensify should global inflation continue to ease through the rest of the year.
“We have started to see investors putting a little bit more risk back into their portfolios,” said Chris Piggott, head of Hong Kong ETF Services at Brown Brothers Harriman. “There will be some renewed momentum coming back into some of the China products.”
For investors looking to capitalize on the recovery, consider the KraneShares Hang Seng TECH Index ETF (KTEC). KTEC offers exposure to Hong Kong internet stocks, e-commerce companies, fintech firms, and other tech-related companies.
KTEC seeks to track the aforementioned Hang Seng TECH Index. The index itself includes the 30 technology companies in Hong Kong’s burgeoning tech sector with the highest free-float market capitalization.
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