Discover why Greater China is fueling growth for Asia ETFs! Find out why BBH says it’s the new ‘growth engine’!

Emerging Powerhouse: Greater China’s Dominance in ETF Growth

The landscape of exchange traded funds (ETFs) in the Asia Pacific region is shifting, with Greater China – encompassing Hong Kong, Taiwan, and mainland China – emerging as a key player driving growth. Recent reports indicate that investor demand in Greater China is poised to continue its robust expansion over the coming year, solidifying its position as the fastest-growing ETF market in the region.

Key Points:

1. Domination in Net Flows: In the first half of this year, Greater China markets have seen $102 billion in net flows, representing 70% of all net new flows in Asia-Pacific. This surge has propelled the combined ETF assets in Greater China to $557 billion, constituting 38% of total Asia-Pacific ETF assets.
2. Institutional Adoption: The adoption of ETFs among institutional investors in Greater China is on the rise. A survey conducted by Brown Brothers Harriman reveals that 77% of respondents plan to increase their use of ETFs in the next 12 months. Among the respondents, those based in Taiwan exhibited the strongest interest at 87%, followed closely by mainland Chinese investors at 77% and Hong Kong investors at 69%.
3. Diverse Portfolio Allocations: Notably, 39% of institutional investors in Greater China allocate more than 50% of their portfolios to ETFs, a higher proportion compared to the global average of 24%.

The Growing Landscape:

Chris Pigott, head of Asia ETF services at Brown Brothers Harriman, emphasizes that Greater China is driving ETF asset growth in the Asia-Pacific region. While Taiwan and Hong Kong witness retail ETF investment expansion, China’s onshore ETF market is buoyed by investments from state-backed organizations. Specifically, China’s onshore CSI 300 broad-based equities products have attracted significant inflows, signaling substantial market growth.

The Road Ahead:

1. Expansion in Provider Utilization: A majority of institutional investors in Greater China intend to diversify their ETF providers. This trend is most pronounced in Taiwan, where 70% of investors plan to engage with more ETF issuers next year. Similarly, 63% of respondents in Hong Kong and 58% in mainland China express their intent to work with a broader array of ETF firms.
2. Shift towards Diversification: The rising demand for portfolio diversification is steering the growth of ETF platforms to include active, thematic, and multi-asset strategies in Greater China. Moreover, Chinese investors’ appetite for outbound investments underscores the importance of cross-border ETF offerings through schemes like the qualified domestic institutional investor (QDII).

Conclusion:

In conclusion, as Greater China continues to propel exponential growth in the ETF market, investors and institutions alike stand to benefit from the diverse opportunities presented by the evolving landscape. With a strategic focus on innovation, diversification, and regulatory alignment, the region is poised to shape the future of ETF investments in the Asia-Pacific sphere.