BMO to comply with Vanguard and exit Hong Kong’s ETF market

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Canada’s BMO International Asset Administration plans to exit from Hong Kong’s trade traded fund market, and to dump its seven regionally listed ETFs on to China Asset Administration (Hong Kong), two individuals with data of the matter have confirmed to Ignites Asia.

BMO has struggled to lift substantial belongings in any of its ETF methods, amassing simply HK$2.86bn ($369.4m) throughout its seven ETFs.

Its largest Hong Kong-listed ETF, the BMO Asia USD Funding Grade Bond ETF, had belongings of HK$1.7bn as of September 15, whereas its smallest, the BMO MSCI Asia Pacific Actual Property ETF, had simply HK$8.4m.

BMO’s whole ETF belongings in Hong Kong are just like these amassed by world funds large Vanguard, which revealed final month that it too could be quitting the Hong Kong ETF market.

Over its eight years of operation in Hong Kong, Vanguard managed to tug in about HK$3.35bn in belongings throughout six ETFs as of final month. The biggest one, the Vanguard S&P 500 index ETF, accounted for roughly half of the whole belongings.

This text was beforehand printed by Ignites Asia, a title owned by the FT Group.

The businesses’ retreat from Hong Kong’s stagnant ETF market underscores the challenges of making an attempt to compete in opposition to a handful of enormous suppliers providing giant China and Hong Kong-focused methods.

Solely six out of practically 30 ETF suppliers in Hong Kong have greater than $1bn in belongings of their regionally listed ETF ranges, with corporations resembling State Road International Advisors, Cling Seng Funding Administration, BlackRock and CSOP topping the record, in keeping with Morningstar information.

China AMC (HK), which is able to purchase BMO International AM’s ETF belongings, is at the moment the fifth-largest ETF participant available in the market with $2.28bn throughout 13 methods as of the tip of final month, Morningstar information exhibits.

The Hong Kong ETF market could be very skewed in direction of China and Hong Kong equities methods when it comes to belongings below administration, mentioned Jackie Choy, Hong Kong-based director of ETF Analysis for Asia at Morningstar.

First-comer benefit has confirmed to be fairly essential available in the market and these preliminary belongings have been fairly sticky, whereas new ETFs which have an identical publicity to present methods haven’t been as aggressive, Mr Choy added.

Toronto-headquartered BMO International AM, a subsidiary of Canada’s BMO Monetary Group, is at the moment finalising the phrases of the switch of its Hong Kong-listed ETF vary to China AMC (HK), in keeping with the 2 individuals aware of the matter.


HK$343bn


Complete market capitalisation for Hong Kong’s ETF market on the finish of August

BMO International AM listed its first three merchandise on the Hong Kong trade — the BMO Asia Excessive Dividend ETF, BMO Asia USD Funding Grade Bond ETF and BMO Hong Kong Banks ETF — in 2013.

The corporate adopted this up with 4 different ETFs launched in 2016, specifically the BMO Nasdaq 100 ETF, BMO MSCI Asia Pacific Actual Property ETF, BMO MSCI Japan Hedged to USD ETF and BMO MSCI Europe High quality Hedged to USD ETF.

BMO International AM additionally runs one balanced mutual fund in Hong Kong, whereas its dad or mum firm, the Financial institution of Montreal, operates a non-public financial institution within the territory. These are believed to be unaffected.

Newcomers to Hong Kong’s ETF market had been hoping that an ETF Join scheme could be arrange, permitting Hong Kong ETFs to entry mainland buyers.

However as an alternative, Hong Kong and mainland China regulators introduced a much less bold cross-listing master-feeder framework approving two pairs of ETFs authorised to be bought within the respective markets.

Neither BMO International AM nor ChinaAMC responded to Ignites Asia’s requests for remark.

Complete market capitalisation for Hong Kong’s ETF market stood at HK$342.62bn on the finish of August this 12 months — down from HK$344.57bn on the finish of August 2014.

BMO and Vanguard aren’t the one ETF suppliers to have exited the Hong Kong ETF market or to have delisted unsuccessful methods lately.

In 2019, Hong Kong-headquartered Enhanced Funding Merchandise pulled out of Hong Kong’s ETF market, citing the indefinite delay of the ETF Join scheme, in addition to the persistence of retrocession charges.

Difficulties in gathering vital belongings additionally contributed to a variety of ETF delistings in 2018. Mirae Asset International Investments, GF Funding Administration, E Fund Administration, CSOP Asset Administration and BlackRock all shuttered ETFs in Hong Kong that 12 months.

*Ignites Asia is a information service printed by FT Specialist for professionals working within the asset administration trade. It covers every little thing from new product launches to rules and trade traits. Trials and subscriptions can be found at ignitesasia.com.

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