Caixin
Sep 16, 2020 07:44 PM
FINANCE

BlackRock’s New Exchange-Traded Fund Highlights China Tech’s Growing Global Sway

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BlackRock Inc., a major global money manager, plans to launch an exchange-traded fund (ETF) Thursday to track Hong Kong’s new index of technology stocks, giving a nod to the growing importance of Chinese tech giants among global investors.

The new ETF will likely funnel more investor funds into Hong Kong-listed tech stocks, which include titans like Tencent Holdings Ltd. and Alibaba Group Holding Ltd., just as a growing number of U.S.-listed Chinese tech companies have filed for a secondary listing in the city amid rising China-U.S. tensions.

The iShares Hang Seng Tech ETF will track the Hang Seng Tech Index, which gauges the performance of the 30 largest tech companies listed in the city, according to a prospectus released on Tuesday. Investors can trade the ETF using either U.S. dollars or Hong Kong dollars.

Susan Chan, head of Asia at BlackRock, said investors in China and Southeast Asia have shown growing interest in the Hang Seng Tech Index.

BlackRock is the fourth company to roll out an ETF tracking the index, following CSOP Asset Management Ltd., China Asset Management Co. Ltd. and Hang Seng Investment Management Ltd. As of Wednesday, the Hang Seng Tech Index was up almost 10% from its July 27 launch. The broader Hang Seng Index was nearly flat over the same period.

However, BlackRock’s ETF will likely face challenges in attracting retail investors in Hong Kong. In many cases, banks sell fund managers’ ETFs to customers, acting as an intermediary. The fees banks charge make ETFs more expensive, which is a problem for a passive investment product typically marketed as low-cost. Meanwhile, mom-and-pop investors in the city prefer stocks to stock market indexes, which explains why its ETF market is relatively small.

As of the end of March, HK$279.2 billion ($36 billion) in ETF assets were listed on the Hong Kong Stock Exchange, accounting for less than 1% of the global ETF industry.

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Michael Bellart (michaelbellart@caixin.com)

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