Development of Asian ETF Market - IMAS

Development of Asian ETF Market

July 2015

Material prepared by CSOP Asset Management Limited.

Global Overview – Number of ETFs

Source: AUM – Deutsche Bank, Bloomberg, Reuters, as of 17 Apr 2015

Turnover – World Federation of Exchanges, for the period Mar 2015 YTD

Part 1 Hong Kong ETF Market

Overview – Rank

HKEx’s ETF market is now ranked 2nd by AUM and 3rd by turnover in Asia Pacific.

By Asia Pacific ETF AUM By Asia Pacific ETF Turnover



HKEx’s ETF market continued to enjoy strong growth in 2014 and 2015.

Source: HKEx, as of end of Jun 2015

Overview – Turnover Growth

ETF Average Daily Turnover and Number of Listed ETFs at HKEx

Turnover has been dominated by A-share ETFs but HK equity ETFs’ turnover has been

increasing lately.

ETF Average Daily Turnover by ETF Underlying Markets

Source: HKEx, as of end of Apr 2015

Overview – Turnover Breakdown

ETF Products – Managers

25 ETF managers across the globe are attracted to list ETFs in HK, with 130 ETFs issued

Mainland A-Share: 11

CSOP Asset Management 6

BOCI-Prudential Asset Management 5

Ping An of China Asset Management (HK) 4

China Universal Asset Management (HK) 3

E Fund Management (HK) 3

Harvest Global Investments 3

China Asset Management (HK) 2

Bosera Asset Management (International) 1

CICC Hong Kong Asset Management 1

Da Cheng International Asset Management 1

Hai Tong Asset Management (HK) 1

Europe: 3

Deutsche Asset & Wealth Management

Investment S.A. 35

ETF Securities (HK) 3

HSBC Investment Funds (HK) 1

Asia ex-Mainland China: 7

Mirae Asset Global Investments (HK) 11

Enhanced Investment Products 8

Value Partners Hong Kong /

Sensible Asset Management Hong Kong6

Hang Seng Investment Management 5

Samsung Asset Management (HK) 2

Yuanta Securities (HK) 1

Lippo Investments Management 1

North America: 4

BlackRock Asset Management North Asia 15

State Street Global Advisors 4

Vanguard Investments HK 4

BMO Global Asset Management (Asia) 3


Mainland A-Share: 42

CSI 30

FTSE 4

CES 3

MSCI 2

HSI 1

SZSE 2

ETF Products – Product Range

HKEx’s ETF market offers a wide range of investment exposure covering various Equities &

FICC.

Hong Kong Equity: 20

HSI 7

CSI 6

FTSE 3

MSCI 3

NASDAQ 1

Asia Pacific Equity: 43

Regional market 10

Regional sector 6

India 4

Korea 4

Taiwan 4

Indonesia 2

Japan 2

Malaysia 2

Philippines 2

Thailand 2

Bangladesh 1

Greater China 1

Pakistan 1

Singapore 1

Vietnam 1

Other Equity: 10

US 4

Global 3

Brazil 1

Europe 1

Russia 1

Fixed Income & Currency: 9

Mainland China RMB Fixed

Income4

Asian Fixed Income 2

Currency 2

Hong Kong Fixed Income 1

Commodity: 6

Gold 4

Silver & Platinum 2


ETF Products – Most Actively Traded ETFs

The CSOP A50 ETF (2822) and X ISHARES A50 ETF (2823) are among the most actively

traded stocks on HKEx.

Source: HKEx, as of July 20, 2015

0

2

4

6

8

10

12

7-2 7-3 7-6 7-7 7-8 7-9 7-10 7-13 7-14 7-15 7-16 7-17 7-20 7-21 7-22 7-23

Bill

ion

s H

KD

2822 HK Equity 2823 HK Equity

ETF Products – New Listings


Mainland China A-share：

New Listings:

• Value China A-Share ETF (3095/83095)

• CSOP SZSE ChiNext ETF (3147/83147)

• Harvest CSI Smallcap 500 Index ETF

(3150/83150)

Conversion from Synthetic to Physical:

• W.I.S.E. – SSE 50 China Tracker (3024)

Asia Pacific & International Equity

New Listings:

• CSOP MSCI T50 ETF (3021)

• XIE Shares FTSE Chimerica ETF (3161)

• Vanguard S&P 500 Index ETF (3140)

Hong Kong Equity

New Listings:

• KODEX HSI Futures ETF (3124)

• KODEX HSI Futures RMB FX ETF (3134)

7 ETFs have been newly listed in 2015 YTD

Fixed Income & Currency

New Listings:

• CSOP China Ultra Short-Term Bond ETF

(3122/83122)

ETF Products – RQFII A-Share

Source: Bloomberg, as of end of Mar 2015

Hong Kong dominates the China RQFII ETF market globally by number, turnover and MC

RQFII A-Share ETFs in Hong Kong, US and Europe

Number 2015 YTD Turnover Market Capitalisation

ETF Derivatives – on A-Share ETFs

HKEx provides various complementary products on ETFs

ETFsStock

Options

Stock

Futures

Derivative

WarrantsCBBCs

FTSE

A50

• CSOP FTSE China A50

(2822/82822)

• iShares FTSE A50 China

(2823)

• Bosera FTSE China A50

Index ETF (2832/82832)

√

(SO on

2822 &

2823)

√

(SF on

2822 &

2823)

√

(on 2822,

82822 &

2823)

√

(on 2822 &

2823)

CSI

300

• W.I.S.E – CSI 300 (2827)

• ChinaAMC CSI 300

(3188/83188)

√

(SO on

2827,

3188)

√

(SF on

3188)

√

(on 3188)

√

(on 3188)

CES

120

• E-Fund CES 120

(3120/83120)

√

(IF)

ETF Derivatives – on HK Equity & FICC ETFs

HKEx provides various complementary products on ETFs

ETFsStock

Options

Stock

Futures

Derivative

WarrantsCBBCs

HSI

• Tracker Fund of Hong

Kong (2800)

• Hang Seng Index ETF

• (2833)

• KODEX HSI Futures (3124)

• KODEX HSI Futures RMB

FX (3134)

√

(IO, Mini IO,

SO on

2800)

√

(IF, Mini IF)

√

(on HSI,

2800)

√

(on HSI,

2800)

HSCEI• Hang Seng H-Share Index

(2828)

√

(IO, SO on

2828)

√

(IF, Mini IF)

√

(on HSCEI,

2828)

√

(on HSCEI,

2828)

Gold

• ETFS Physical Gold (2830)

• SPDR Gold Trust (2840)

• Value Gold (3081/83081)

• Hang Seng RMB Gold

(83168)

√

(on 2840)

Retail Investors – Growth in Participation Rate

31% of stock investors (i.e. 11% of HK adult population) invested in ETFs in 2014 vs 21% in 2011

% of Stock Investors by Type

Source: HKEx Retail Investor Survey 2014

Retail Investors – Trading Pattern

On average, ETF investors had more frequent transactions than equity investors

Average No. of Transactions

in the Past 12 Months

Average Transaction Value


Equity

Investors

Warrant

Investors

CBBC

InvestorsETF Investors

Age 47 47 35 50

Education

background

Tertiary or

above

Tertiary or

above

Tertiary or

above

Tertiary or

above

Monthly personal

income~$22,500 ~$22,500 ~$35,000 ~$22,500

Monthly household

income~$45,000 ~$45,000 ~$75,000 ~$45,000

ETF Retail Investors – Profile


Other Key Features

• HKEx is the bridge between China and global markets – both strength and weakness

• HKEx provides various complementary products on ETFs, including warrant, CBBC,

stock option and futures, which help the development of ETFs.

• The Dual Counter system (RMB and HKD) of some RQFII ETFs increases the trading

volume in the secondary market, and the potential Triple Counter system (with USD) will

make it more interesting for global investors to trade.

• Leveraged and Inverse ETFs launched Taiwan in 2014. What about Hong Kong?

• The CES China 120 index futures contract is a total solution to China investment. It is

based on an underlying index that tracks both China’s A-shares and China stocks listed in

Hong Kong. New ETF products will be based on this index.

• Developments to make ETF listing process more efficient.

Part 2 Taiwan ETF Market

Overview – Rank

TWSE’s ETF market is now ranked 6th by AUM and by turnover in Asia Pacific.




69(18%)

46(20%)

Overview – Growth

Source: TWSE, as of 23 July 2015

The average daily turnover of TWSE’s ETFs is increasing rapidly from 2013. Taking into

consideration of the exchange rate, the average daily turnover of TWSE’s ETFs in 2014 is

less than 10% of HKEx’s (4,727 million HKD).

137

317 322 303

508

932

788 795

1,461

1,077 1,148

1,747

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Average Daily Turnover (NT$ million)



TWSE has included leverage & inverse ETFs, which haven’t appeared in Hong Kong market.

“Offshore ETF” is

launched by an

offshore asset

management firm

and cross-listed on

TWSE.

“Feeder Fund ETF”

is launched by a

domestic securities

investment trust

enterprise and linked

to an offshore ETF.

ETF Products – Product Range (Cont.)


There are 28 ETFs in total listed on TWSE (vs 130 in Hong Kong).

Domestic ETF: 12

Yuanta/P-shares Taiwan Top 50 ETF

Yuanta/P-shares Taiwan Mid-Cap 100 ETF

Fubon Taiwan Technology Tracker Fund

Yuanta/P-shares Taiwan Electronics Tech ETF

Yuanta/P-shares S&P Custom China Play 50ETF

Yuanta/P-shares MSCI Taiwan Financials ETF

Yuanta/P-shares Taiwan Dividend Plus ETF

Fubon MSCI® Taiwan ETF

Fubon Taiwan Eight Industries ETF

Fubon Taiwan Finance ETF

Yuanta/P-shares TWSE Taiwan Non－Tech50 ETF

Yuanta/ P-shares MSCI Taiwan ETF

Sinopac TAIEX ETF

Fubon FTSE TWSE Taiwan 50 ETF

ETF comprising foreign securities: 6

Fubon SSE180 ETF (FB SSE180)

Yuanta/P-shares SSE50 ETF

Fuh Hwa CSI300 A Shares ETF (FH CSI300)

W.I.S.E. Yuanta/P-shares CSI 300 ETF

Cathay FTSE China A50 ETF

Fubon SZSE 100 Index ETF

Leveraged & Inverse ETF: 6 (3 pairs)

Yuanta Daily Taiwan 50 Bull 2X ETF

Yuanta Daily Taiwan 50 Bear -1X ETF

Fubon SSE180 Leveraged 2X Index ETF

Fubon SSE180 Inversed Index ETF

Yuanta Daily CSI300 Bull 2X ETF

Yuanta Daily CSI 300 Bear -1X ETF

Offshore ETF: 3

Hang Seng H-Share Index ETF(HSHETF)

Hang Seng Index ETF (HSIETF)

W.I.S.E.-SSE 50 China Tracker®

Hang Seng H-Share Index ETF(HSHETF)

Hang Seng Index ETF (HSIETF)

W.I.S.E.-SSE 50 China Tracker®

Offshore ETF: 1

Yuanta S&P GSCI Gold ERFutures ETF

Key Developments – LP Program

Although Taiwan’s ETF market formally began in 2003, only a small portion of ETFs have

any significant trading value. Thus, Liquidity Provider Program was launched in 2008 and

2014 to encourage liquidity.

2008 Liquidity Provider Program

• ETF issuers (SITEs) could designate up to three LPs per ETF.

• Subject to certain performance criteria, LPs could receive rebates and monetary rewards from TWSE.

2014 Liquidity Provider Program

• Minimum of one Liquidity Provider (Securities Firm) per designated ETF.

• Predefined quoting obligations.

• A monetary award is given to the top three liquidity providers for meeting predefined criteria for their

designated ETFs.


Key Developments – L&I ETF


Since the inception of the ETF market in Taiwan, ETF trading value as a proportion of total

trading value on the centralized market has increased to 1.2% as of August 2014 from 0.17%

in 2003.

• After launching inverse and leveraged ETFs in 2009 and 2010 respectively, Korea market saw ETF

trading value as a proportion of total trading value on the centralized market shoot to 7.1% in 2011 from

2% in 2010.

• In Japan, the launch of leveraged and inverse ETFs in 2012 brought ETF trading value as a proportion

of total trading value on Japan market up by five times to 3.64% in 2013 from 0.69% in 2012.

Learning from the Korea and Japan market experience, TWSE introduced Leveraged &

Inverse ETFs to its markets in 2014.

Key Developments – Other Developments


In April 2015, the TWSE unveiled its first futures-based ETF, which tracks the prices of gold

futures. Hong Kong also launched its first futures-based ETF, tracking Hong Kong underlyings

this year.

The TWSE has also established the multi-currency trading mechanism, through which ETFs

can amass funds in Taiwan Dollars while being listed and traded in more than one currency.

Part 3 Korean ETF Market

Overview – Rank

KRX’s ETF market is now ranked 4th by AUM and 5th by turnover in Asia Pacific.




69(18%)

46(20%)

36(10%)

Overview – Growth

Source: KRX, as of 23 July 2015

KRX’s daily average trading value and market capitalization of ETFs have increased quickly

since inception. The average daily turnover of KRX’s ETFs in 2014 is approximately the

same as HKEx’s, but HKEx’s ETF market is growing to more than twice of KRX’s this year.

0

5000

10000

15000

20000

25000

0

100

200

300

400

500

600

700

800

900

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Trading Value (Left, KRW billion) Market Capitalization (Right, KRW billion)

This chart shows the daily

average levels of Trading

Value and Market Cap.



KRX’s ETF market offers a wide range of investment exposure.

ETFs(148)

Fixed Income (19)

Currency (2)

Commodity (9)

Inverse/Leverage (9)

Real Estate (2)

Equity (107)

Market Rep. (23)

Theme (34)

Style (3)

Sector (33)

Foreign Stock (14)

Overview – Growth


The largest ETFs listed on KRX are equity ETFs tracking KOSPI 200.

Rank Code Name Underlying Index ProviderAUM

(billion KRW)

1 A069500 KODEX 200 KOSPI 200 Samsung Asset 4,362.3

2 A122630 KODEX Leverage KOSPI 200 Samsung Asset 2,268.1

3 A102110 TIGER 200 KOSPI 200 Mirae Asset 1,575.4

4 A153130 KODEX KRW CASH KRW Cash Index (Total Return) Samsung Asset 1,001.8

5 A105190 KINDEX 200 KOSPI 200 Korea Investment 842.2

6 A102780 KODEX Samsung Samsung Group Samsung Asset 778.7

7 A152870 Power K200 KOSPI 200 Kyobo AXA 678.6

8 A114800 KODEX Inverse F-KOSPI 200 Samsung Asset 504.8

9 A157450TIGER MONEY

MARKETKIS MSB 3M(Total Return) Mirae Asset 370.5

10 A152100 ARIRANG 200 KOSPI 200 Hanwha 353.8

Part 4 Japan and Singapore ETF Market

Overview – Rank




69(18%)

46(20%)

Overview

• As the largest ETF market in the Asia Pacific area, JPX’s ETF AUM and turnover are

more than 140% of HKEx’s AUM and turnover.

• Comparing to other markets, trading volumes of ETFs on Singapore market are relatively

stable these years. And its market size is even less than Taiwan market. The AUM and

turnover are all less than 10% of the HK market.

Monthly Volume & Turnover of SGX’s ETFs

Source: SGX, as of 24 July 2015

Features and Developments

• Japanese ETF market is a well developed market which includes different types of ETFs,

such as leveraged and inverse ETFs, JDR structures, thematic ETFs, ETNs, REITs, bond

ETFs, enhanced (risk control, covered calls etc.)

• Singapore regulators had changed the rule in April to made more ETFs accessible to

retail investors. SGX data shows that the most actively traded ETFs include ETFs that

give investors access to popular markets such as Shanghai and Mumbai

• In the future, the ETFs in these mature markets will probably turn to the investment in

emerging markets, and more innovative ETF products may appear.

Contact Information

Melody He, Head of Capital Markets, CSOP Asset Management

Phone: +852 34065635

Email: [email protected]

Web-address: www.csopasset.com

mailto:[email protected]

Documents

Development of Asian ETF Market - IMAS