HKEx Chairman Ronald Arculli
Development of ETFs and Other Index Products
Opening Remarks
13 May 2011
Good morning.
It’s great to see so many people here this morning, and I would especially like to warmly welcome our friends from the Mainland to Hong Kong. I hope you get to enjoy some delicious Cantonese food and shopping during your stay!
We are always very pleased to work together with the Shanghai Stock Exchange. As many of you are aware, our two exchanges signed the Closer Cooperation Agreement in January 2009 to further solidify our working relationship as we strive towards the common goals of mutual prosperity and the greater development of China’s economy.
Since the signing of the agreement, the management of HKEx and the Shanghai Stock Exchange have been meeting on a regular basis. We met in January this year to discuss several cooperation opportunities and one of these was a joint conference on product development. Last March we had a joint conference in Shanghai, and now it is our turn to be the host.
Last year’s conference was very productive and involved excellent exchanges of views and opinions. I have no doubt that we’ll be able to generate a lively discussion today as well.
Over the next several hours we will hear a lot about the opportunities presented through the listings of Index-linked products including ETFs, which are popular in Hong Kong and increasingly popular in the region. We listed our first ETF here in Hong Kong back in 1999, which was a Hong Kong tracker fund. In 2000, our total turnover in ETFs was $19.9 billion Hong Kong dollars.
Since then, we have seen an exponential increase in the number of ETFs listed and their contribution to market turnover. Today we have 76 ETFs on our exchange, accounting for 3.5 per cent of our total overall market turnover last year. Turnover in ETFs has grown to more than $600 billion Hong Kongdollars last year.
While growth has been strong in Hong Kong, we know that ETFs clearly had a head start in Europe and North America. In the first three months of 2011, the New York Stock Exchange and Nasdaq saw a combined turnover of $1.8 trillion US dollars to claim the top two spots globally. London finished a distant third with a turnover of $79 billion US.
Meanwhile, from January to March this year, the Hong Kong Stock Exchange saw ETF turnover of HK$160 billion, putting us 8th in the world, but first place in Asia. This tells us two key things: that there is demand for ETFs, and that the market for ETFs in Asia is largely untapped, creating a number of opportunities for issuers and investors. According to our observations, Asian investors are increasingly viewing ETFs as an important part of their portfolios, which provide them with exposure to developing economies.
While ETFs appear to be one of the most popular index-linked products, others are also growing in popularity such as structured products and derivatives such as futures and options. For example, turnover of index-linked structured products trading on our Exchange, including derivative warrants and CBBCs, totalled $2.5 trillion Hong Kong dollars last year, or 14.62 per cent of our securities market total turnover. It represents a significant increase – a 206 times increase – when we compare it with that of ten years ago. In 2000, only $12 billion Hong Kong dollars worth index-linked structured products were traded on our securities market, accounting for only 0.4 per cent of our market total turnover.
To discuss these opportunities and how to grasp them, we have assembled an excellent line-up of panellists and moderators who will kick off discussions on this growing market, recent developments and trends in the index product industry, and share experience on the internationalisation of ETFs. One area we are exploring along with the Shanghai Stock Exchange is more cross-border ETFs, which would provide mainland investors with exposure to the Hong Kong stock market, and vice versa. This involves cooperation between our two exchanges, and also with the relevant regulatory bodies.
I expect today we will get a very good start towards seizing opportunities and growing the ETF market here and in Mainland China.
Thank you.