Samsung AM hopes for retail interest in ETFs

Added 3rd May 2016

Samsung Asset Management intends to launch at least one leveraged and one inverse exchange-traded fund in Hong Kong.

Samsung AM hopes for retail interest in ETFs

The firm has submitted applications for the products to the Hong Kong Stock Exchange. They are aimed at retail investors.

“The daily compounded effect [of the leveraged and inverse ETFs] means it is not desirable to hold the products for a long period, so institutional investors would not [be attracted to] these products," said Sunhwa Kim, senior portfolio manager of the ETF and index team.

"But retail investors can leverage it as a short-term investment tool.”

Commenting on the not-so-active ETF trading in the SAR, Kim said that it takes time to grow the scale of retail investors.

“Before we brought the first inverse ETF to Korea in 2009, most of the investors were institutions. But after that, more retail investors became interested in ETFs,” Kim said.

Hong Kong's small ETF market  

In February, Hong Kong's Securities and Futures Commission gave a pass to higher-risk ETFs, such as leveraged and inverse products. These ETFs can track overseas equity indices outside mainland and Hong Kong markets.

Samsung’s products will be tracking major markets, as liquidity is one of the key concerns, the team’s market director Louis Poon said.

He admitted that Hong Kong’s ETF market is realtively small, but he believes it could be on a growth track.

Poon cited UK data provider ETFGI figures that showed exchange-traded products in Asia Pacific ex-Japan had record inflows of $7.1bn in the first quarter.

CSOP Asset Management gathered the largest net inflows with $1.18bn during the same period, followed by Taiwan’s Yuanta with $906m.

However, Hong Kong’s ETF market had market capitalisation of HK$297bn ($38.3bn) at the end of March, which slightly shrank from last December’s HK$304bn, according to Hong Kong Stock Exchange data.

The 10 most actively traded ETFs remain those with a Hong Kong or China equity focus, except one which tracks the gold price. But only four ETFs had average daily turnover of more than HK$900m in March.

Samsung became the first to launch futures-based ETFs in the SAR last year, and last week launched Hong Kong's first crude oil futures ETF.

Research company Cerulli earlier predicted strong growth in leveraged and inverse ETFs in Hong Kong.

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