Developments in the HK Exchange Traded Fund market

Following my recent discovery of a newly listed RMB Bond ETF (3139.HK), i decided to see if i could find any other new additions to the market.

As background, whilst the USA (and to a lesser extent the UK) have a wide range of exchange traded funds offering low cost pre-packaged investment portfolios (generally tracking an index), Hong Kong has traditionally had much less choice.  Apart from the excellent 'Tracker Fund of Kong Kong' (2800.HK) which offers an ultra low cost (0.15%) dividend paying tracker of the HSI index, and a handful of China & Asia focused ETFs, there has been limited other options to gain wider global / asset class diversity at a similar low cost.

I was therefore particularly pleased to discover another newcomer to the market, being the Vanguard FTSE Asia ex Japan ETF (2805.HK). Launched in May 2013, this ETF offers wider emerging Asia exposure, with a weighting biased towards China, South Korea, HK, Taiwan & India.

Whilst i haven't dived straight in for a purchase at this stage (still mulling over country risks, current valuations & lower yields), i am pleased to see this mainly because of its issuer, Vanguard.

Vanguard have a strong reputation in the USA for providing low cost investment options in particular for privately managed pension schemes.  The total expense ratios (TER) or costs to the investor tend to be much lower than most UK & HK listed ETFs i've seen, which i suspect is a consequence of a more mature & competitive ETF market in the USA.

Vanguard have recently launched a basic range of ETFs in the UK, including my personal favourite Global High Dividend ETF (VHYL.L), which looks to have shaken up the market by offering lower cost products compared to some of the more established players. More recently i've noticed Ishares UK have reduced a number of the TERs on their much larger UK range - this may well be in response to the new competition.

It is for this reason i'm pleased to see Vanguard launch their first HK listed ETF.  Whilst this appears to be an initial market tester, it looks to have had reasonable take up since launch.  With a TER of 0.38%, it also looks to be cheaper than other multi-country emerging markets ETFs (the similar ishares hk emerging asia ETF 2802.HK has a TER of 0.59%).

I'll be keeping a close eye on the major HK ETF issuer websites going forward.  It may even be worth purchasing this new ETF just to encourage them to stick with & help to further develop the HK market!