HK's ETP market hits new milestone

Hong Kong's exchange-traded products (ETPs) market has experienced a breakthrough year, with surging daily turnover propelling it to among the top three in the world. Industry players expect continued momentum as the market deepens its connections with global capital through ongoing innovation and expanding cross-border investment.

The local ETP market — including exchange-traded funds (ETFs) and leveraged and inverse products — has seen explosive growth this year, with the year-to-date average daily turnover hitting HK$37.8 billion ($4.86 billion) as of end-September, said Hong Kong Exchanges and Clearing (HKEX).This surge has helped the special administrative region overtake South Korea and Japan, making it the third-largest ETP market in the world by turnover.

Data from HKEX also showed that the Hong Kong market reinforced its global leadership with a turnover velocity of 14.7, indicating that ETPs are traded more actively than in other markets.

Brian Roberts, the exchange's managing director and head of equities product development, on Tuesday said the total market value of assets under management in Hong Kong's ETF market has doubled over the past decade, growing from around HK$300 billion to HK$650 billion by 2025.

"Hong Kong's ETF market today is one of Asia's most diverse, with over 200 ETFs and leveraged and inverse products listed, from artificial intelligence to biotech," Roberts said at the HKEX ETF Summit.

Highlighting the market's continued product innovation and increasing diversity, as well as the city's stronger role as a cross-border investment gateway, he expects these driving forces will fuel even faster growth going forward.

Jean-Francois Mesnard-Sense, HKEX's head of exchange-traded products, said one of the key drivers behind the strong growth this year is the rising popularity of tech-themed ETFs, which have played a major role in the uptick. Meanwhile, the robust inflows into eligible ETFs through the southbound leg of Stock Connect have also contributed significantly.

Stock Connect is a mutual market access program linking HKEX with the Shanghai and Shenzhen exchanges. Currently, there are nearly 300 ETFs eligible for trading through the scheme, comprising 273 Chinese mainland-listed funds in the northbound channel and 17 Hong Kong-listed in the southbound channel.

Lu Wenjun, deputy director of the international cooperation department of the Shenzhen Stock Exchange, said the program can provide a more accessible and friendly environment for global investors, and at the same time enhance the appeal of the Asian market.

Noting that Hong Kong has served as a bridge between the mainland capital market and the rest of the world, Lu said the Shenzhen side will continue to deepen cooperation with the SAR, and further engage with global investors.

Hong Kong has also enhanced financial ties with the Middle East in recent years. Last October, the SAB Invest Hang Seng Hong Kong ETF — a fund that tracks the performance of Hong Kong's benchmark Hang Seng Index — was listed on the Saudi Exchange, or Tadawul. This investment vehicle provides Saudi investors with a direct channel to Hong Kong's equity market, as well as to the broader mainland market.

Rosita Lee, director and CEO of Hang Seng Investment Management, said the cooperation is a breakthrough and has provided convenient solutions for Middle Eastern investors who seek more exposure to the Chinese market.

"With this kind of collaboration, we can easily introduce and provide easy market access to local asset owners. And there's no need for them to trade in a different time zone," she said, adding that it also demonstrates Hong Kong's ability to introduce its investment stories overseas.