Post on 20-Oct-2014
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1
Hong Kong – A Regional Hub
for ETFs
Christina Christina ChoiChoi
Director of Investment Products DivisionDirector of Investment Products Division
Securities and Futures CommissionSecurities and Futures Commission
28 November 200728 November 2007
2
Growth of ETFs Worldwide
1 1 2 5 8 1840
74
105
142
212
310
412
574
604
666
336
461
732
847
916
3
282
280
202
92
3331212143
0
100
200
300
400
500
600
700
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007Q1 May-07
0
100
200
300
400
500
600
700
800
900
1000
Assets USD billionsAssets USD billionsAssets USD billionsAssets USD billions No. of ETFsNo. of ETFsNo. of ETFsNo. of ETFs
AUM (US Bil)
No. of ETFs
Source: Morgan Stanley Investment Strategies, Bloomberg
3
Growth of ETF Market in
Asia Pacific*
$0
$10
$20
$30
$40
$50
$60
12/01 12/02 12/03 12/04 12/05 12/06
0
10
20
30
40
50
60
70
80
Assets #of Funds
* Includes Australia, New Zealand and Japan
Asse
ts in
US
Bil
Num
ber o
f Fund
s
ETF Growth in Assets by Region Assets as of Dec 31, 2006
Source: Morgan Stanley Investment Strategies, Bloomberg
4
208.941.616India
Source: WFE website, Morgan Stanley Investment Strategies
35.650.172Malaysia
49.470.586New Zealand
584.400.94Australia
309.341.1616Singapore
2,498.231.606Taiwan
6,916.251.6520Korea
12,202.814.424China
12,573.3811.5417Hong Kong
30,989.6035.1113Japan
(US$ bn)
Total Turnover YTD
(US$ mn)
Market
Capitalization
Number
August 2007
Location
Number, AUM and Turnover of ETFs in Asia Pacific
5
ETFs in Hong Kong
� 17 authorized ETFs in HK with market capitalization of
about HK$120 billion as of October 2007
� International and diversified ETF platform with exposures
to different underlyings:
� Single Markets: Hong Kong, China, India, Russia
� Regional Markets: Asia Pacific, World
� Fixed Income: Asian Bond
� Commodities futures
6
Regulatory Challenges
� Index acceptability
� Investor education
� Retail investors awareness
7
Our Regulatory Approach
� Principles-based
� Open architecture
� Market facilitation vs. investor protection
8
Market Facilitation
� Published the ETF Guidelines in 2003:
� Streamlined requirements on investment restrictions and risk disclosure requirements
� Suitable disclosure of trading information for ETFs; and
� Streamlined recognition of overseas ETFs
� Stamp duty relief for ETFs with non-Hong Kong stocks as underlying
� Market making mechanism� Exemptions for transaction levy
9
Product Developments
� Principles-based approach on assessment of index acceptability
� index must have a “clearly defined” objective / market / sector
� index must be “broadly based”
� index must be “investible” and “transparent”
� sufficient safeguards to handle conflicts
10
Investor Education
� Investor awareness
� Investor education
� Trading price may be different from the NAV
per unit of an ETF
� Specific risk relating to specialised ETF
(e.g. Commodities ETF)
11
Outlook
� Mainland Opportunities
� QDII funds will flow through both equity
investments and a variety of fund products
� Hong Kong serves as a platform for Mainland
investors targeting overseas markets
12
Concluding Remarks
� We will continue to adopt an open architecture to
broaden our international and diversified ETF
platform and strengthen Hong Kong’s position as
the regional hub
� We will continue to work closely with the
industry to foster market growth and development