The Samsung S&P GSCI Crude Oil ER Futures ETF, to be listed on Friday, is Hong Kong’s first ETF product tracking crude oil. It is also the first oil ETF from Samsung AM, which is among the largest ETF managers in Korea.
Sunhwa Kim, senior portfolio manager of the ETF and index team who co-manages the crude oil ETF, believes commodity ETFs, as well as futures-based ETFs are under-represented in the Hong Kong market.
Only seven out of the 165 ETF products traded in Hong Kong are tracking commodities, with five of them tracking gold, one silver and the other one platinum, according to Hong Kong Stock Exchange data.
Marketing director Louis Poon expects most demand to come from institutional investors in Asia. “According to the experience in Korea and Japan, some institutions prefer this kind of ETFs rather than hiring a full-time specialist in margin or futures management. It might be more cost effective to buy an ETF instead.”
The firm also hopes local retail investors will show interest.
"At the moment, the easiest way for local retail investors to invest in oil would be buying energy related stocks, such as PetroChina or Sinopec. That’s quite an indirect approach to the energy market,” Kim said at a briefing yesterday.
Because Hong Kong lacks instruments to invest in crude oil, the firm is talking to fund managers to see if their madates could be changed so that they could include the ETF in their portfolios, Poon said.
ETFs in Hong Kong, however, have had a tough time building assets. Retail investors have not been attracted to the products, particulary in comparison to the US and Europe. Only 9 ETFs available for sale in Hong Kong have assets over $1bn, FE data shows.
Investor interest in an oil ETF could rise along with an expected rebound in oil prices. Oil has slowly turned up after tumbling to record low in January. Analysts are beginning to say that oil has already bottomed.
Yesterday, the World Bank raised its 2016 forecast for crude oil prices to $41 per barrel from $37 because it expects the oversupply to ease.
"We expect slightly higher prices for energy commodities over the course of the year as markets rebalance after a period of oversupply," said John Baffes, senior economist. "Still, energy prices could fall further if OPEC increases production significantly and non-OPEC production does not fall as fast as expected."
Other fund houses such as Mirae Asset and CSOP are also planning to launch crude oil ETFs soon, FSA reported earlier.