ETFs set to be split off from Stock Connect

Exchange-traded funds Connect are expected to be split off from the Stock Connect once the requirement for minimum assets under management is done away with, according to the Hong Kong Investment Funds Association.

The association was weighing in after the China Securities Regulatory Commission announced the inclusion of more ETFs to Connect Schemes last week by lowering average asset management sizes from HK$1.7 billion to HK$550 million.

Association chief executive Sally Wong Chi-ming expects there not to be many new products included in the short term, since the main investment targets of ETFs are still Hong Kong stocks and Greater China-related products, which mainland investors have already allocated their assets in.

Ideally, the regulator should take ETFs out of the Stock Connect framework to include multicurrency, global equities and fixed income products for investors' diversified allocation needs, Wong said.

Alex Chiu Tsung-man, senior strategist at ETF Business Value Partners, said making HK$300 million the threshold would be appropriate, citing the time it takes for thematic ETFs to grow in terms of AUM.

Chiu said cryptocurrency ETFs could be traded as early as next Tuesday. "The expense ratios of Hong Kong's spot bitcoin or ether ETFs are higher than in the US, but in the long run, more participants will help to lower the fees," he said.

ChinaAMC's Bitcoin ETF (3042) and Ether ETF (3046) are scheduled to debut on Tuesday, with the highest expense ratio of 1.99 percent, with 100 shares as a board lot.

Two from Harvest Global Investments have a 1 percent expense ratio, with 100 shares as a trading board lot. Bosera Asset Management will launch its ETFs with a 0.85 percent expense ratio with the minimum buying of 10 shares a board lot.