Hong Kong stock exchange plans suite of new ETPs

HONG KONG • Hong Kong's stock exchange is looking at introducing a suite of new exchange-traded products (ETPs) after rolling out an initiative to tighten trading spreads and enhancing liquidity in the US$38 billion (S$54 billion) market.

Hong Kong Exchanges and Clearing is considering four new types, including leveraged and inverse products that track mainland China A share indexes, fixed-income exchange-traded funds (ETFs), sectoral and thematic ETFs with underlying Chinese assets and those with an environmental, social and governance investing strategy, head of exchange-traded products Brian Roberts said in an interview.

The products tracking mainland indexes would be the "next source of innovation and diversification", he said. The recent increase in investor interest in fixed-income ETFs seen in the United States will also "come to Asia", he said.

As part of its three-year plan, the exchange is seeking to broaden its palette of trading, moving away from its predominant equity focus.

The exchange yesterday initiated new rules that tightened so-called price ticks and introduced continuous market-making obligations on ETPs. It is also getting help from the government, which is going to waive stamp duty for ETF market makers creating and redeeming units starting on Aug 1.

At the end of April, Hong Kong housed 131 ETPs with a combined market capitalisation of HK$295 billion (S$54 billion). The first ETF in the city was launched in 1999.

The bourse scored a big win over its main rival in Singapore last week, signing a licensing deal with MSCI for 37 futures and options contracts.

That came as the city again braced itself for turmoil after Beijing moved to enact a national security Bill.

The unrest has not fazed investors, said Mr Roberts. "They see that Hong Kong has been and will continue to be a resilient market. When we talk to investors throughout the region, the political backdrop is there. It didn't get raised in new discussion."

BLOOMBERG