2021 proved to be another banner year for ETFs in Greater China with the region growing to $300 billion of assets under management.1 Ongoing education efforts across the region around the structural benefits of the ETF wrapper seem to be resonating with investors while regional regulators and stock exchanges remain committed to developing the ETF infrastructure with a focus on enhancing liquidity and bringing more innovative products to investors in Greater China. This has led to the diversification of the respective product platforms in the region and an increase in the exposures that can be accessed on local exchanges.
As evident in the responses, ETF adoption and usage are at varying stages across Greater China. Investors in each market also have distinct views on key criteria for selecting ETFs.
The Mainland market saw record issuance of ETFs in 2021, but intense competition has pushed the average launch size of ETFs to their lowest in nine years, the official Shanghai Securities News reported. Fund houses launched 271 ETFs in 2021, raising a record 187.6 billion yuan (USD $29.44 billion), Shanghai Securities News said.
84% of investors in the region expect to increase their allocation to ETFs in the next 12 months, up from 76% in 2021. A staggering 95% of institutional investors across the region expect to increase their allocations over the next 12 months.
Like investors in Europe, those in the Greater China region are most concerned with trading volume (compared to the highest emphasis placed on the ETF issuer by U.S. investors) followed by ETF issuer. While historical performance has dropped in importance for investors in the U.S. and Europe in the last year, it remains a top concern for investors across Greater China.
In Hong Kong, managers were also allowed to rebalance the underlying stocks in an ETF without the need to pay stamp duty on those transactions, a significant move for ETFs that either track a popular index such as the Hang Seng or invest in A-shares.2 In Taiwan, consistent with 2021, investors remain focussed on the historical performance of the ETF manager.
Mainland has seen a large number of new ETFs coming to market, the majority of which are highly targeted sector or thematic exposures, which hint at how ETFs are being used there. According to ETFGI, total products increased by 257 in 2021. The vast majority target specific sectors or themes, ranging from robots and virtual reality to livestock breeding and comics and games.