CSOP Asset Management has announced the launch of the CSOP Hong Kong Dollar Money Market ETF (3053 HK) on the Hong Kong Stock Exchange. It becomes the first money market ETF available in the territory.
CSOP Asset Management has launched an HKD money market ETF on the Hong Kong Stock Exchange.
The actively managed fund invests in Hong Kong dollar-denominated short-term deposits, including commercial paper, certificates of deposits and commercial bills.
Benchmarked against the 3-month Hong Kong Dollar Interest Settlement Rate (3-month HIBOR), calculated by the Hong Kong Association of Banks.
It comes with a management fee of 0.30% per annum (estimated ongoing charges of 0.5%) and is expected to achieve around 1.5% annualized return after management fees.
The fund will invest around 75% of the assets into relatively longer duration deposits (greater than one week) with the rest in shorter duration deposits. The average duration of deposits will not exceed 90 days.
Louis Lu, portfolio manager at CSOP Asset Management, said the 3-month HIBOR had increased from 1% to over 2% in the second quarter of 2018, a level only seen in 2008 over the past decade.
He added: “The rate may continue the upward trajectory due to expected monetary tightening in both the US and China. The US Fed is widely expected to raise rates two more times this year. And Hong Kong Monetary Authority is in a boxer’s stance to defend the weak end of the Hong Kong Dollar band, effectively narrowing the Libor-HIBOR spread. Meanwhile, China is determined to continue the deleverage process, draining some capital out of the market.
“Last but not least, Hong Kong Stock Exchange is actively attracting unicorn companies to list in Hong Kong. Market players should not be surprised to see HIBOR hike further, thanks to liquidity squeezes during popular IPO period.”
The minimum required investment in the fund is around HKD 1 million ($130,000), with distributions paid in HKD annually in December subject to portfolio manager’s discretion. Distributions may be paid out of capital.
CSOP notes the fund may be used as a flexible cash management tool for both institutional investors and retail investors.
“Before listing, we have already got initial investment intentions from many corporate treasuries, high-net-worth investors and brokers,” said Melody He, managing director, head of sales and product strategy of CSOP. “Our goal is to provide a revolutionary solution to investors for cash management. We hope that after all the technical hurdles are cleared in the market, Hong Kong investors will finally embrace a flexible, efficient and transparent cash management investment tool.”
CSOP has initiated talks with internet giants to explore the possibility of bringing this money market ETF to a broader base of users.