Analysts remain positive despite tough times

With the notable exception of Japan, Asia's ETFs this year have shown performance that is far from stellar - the three largest Asia-Pacific equity ETFs listed in the United States have all lost money on a year-to-date basis.

The same could be said for Hong Kong's Hang Seng Index-tracking Tracker Fund, and the largest ETF following Chinese A-shares - the FTSE China A50.

Despite the haphazard showing, investors seem unable to stay away. Up until the beginning of August, the Asia ETF market saw its assets under management grow by 14.1 per cent on a year-to-date basis to HK$155.1 billion, according to figures from Deutsche Bank's db X-trackers.

In Hong Kong, assets in ETFs listed in Hong Kong rose to HK$32 billion at the end of June, compared to HK$24.3 billion during the same time last year, according to consultancy ETFGI. And that's only the domestic market. Frank Henze, managing director and head of SPDR ETFs for APAC at State Street Global Advisors (SSgA), says the market for non-domestic ETFs investing in Asia is probably as big as the market for domestic ETFs.

Funds are flowing into Asia ETFs despite the poor performance because they are being used by institutional investors for strategic asset allocation and portfolio diversification and completion purposes, rather than retail investors chasing returns.

"What we have is a very strong underlying current of more and more investors looking to buy into ETFs to cover market exposure, for tactical allocations, and to complete their portfolios," Henze says.