ETFs are hot in Hong Kong as volatile stock market drives traders to exchange-traded funds

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Net fund flows have surged 48 per cent year on year, with an ETF tracking the Hang Seng Index surpassing Tencent in daily volume

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A view of Connect Hall at Hong Kong Exchanges and Clearing in Central. Photo: Jonathan Wong

Aileen Chuang

Published: 7:30am, 5 Nov 2024Updated: 4:35pm, 5 Nov 2024

Hong Kong’s exchange-traded fund (ETF) market is logging a record year thanks to the recent market rally, expanded inclusion in the cross-border Stock Connect programme and a series of new products, including Asia’s first pegged to virtual assets.

Net fund flows of Hong Kong’s exchange-traded product (ETP) market, which includes ETFs and leveraged and inverse products, surged 48 per cent year on year to HK$46.7 billion in the first 10 months, according to HKEX data. That brought the ETP market’s total assets under management (AUM) to nearly HK$500 billion.

Average daily ETF turnover on the Hong Kong stock exchange hit a record high of HK$77 billion (US$9.9 billion) on October 8, riding on the stock market rally since Beijing unleashed its boldest stimulus package to end the property slump and put a floor on equities on September 24.

The markets have been volatile as investors await more fiscal stimulus moves and observe the implementation of the measures in China.

“At times of volatility, investors tend to gravitate towards ETFs because maybe they don’t have time to do stock picking, and they want to quickly react to market developments, market news and market movement, so they transact using ETFs,” said Jean-Francois Mesnard-Sense, head of exchange-traded products at bourse operator Hong Kong Exchanges and Clearing (HKEX).

He added that ETFs accounted for more than 15 per cent of the overall cash market trading volume during the recent spike.