Hang Seng Indexes, a division of Hong Kong-based banking giant Hang Seng, has licensed two indices to Taipei-headquartered Fubon Asset Management for the creation of two inverse and leveraged exchange-traded funds to be listed on the Taiwan Stock Exchange.
The two ETFs in development will provide leveraged and inverse exposure to the Hang Seng China Enterprises Index, a reference for the 40 largest and most liquid China enterprises listed in Hong Kong (pictured) in the form of H shares.
The HSCEI Short Index provides the reverse daily return of the underlying Hang Seng China Enterprises Index (HSCEI), which tracks the performance of the 40 largest and most liquid China enterprises listed in Hong Kong in the form of H shares. Single stock caps of 10% are applied to prevent over-concentration.
As of the end of June 2016, the Hang Seng China Enterprises Index is heavily skewed towards the financials sector with 19 constituents and a 68.4% overall allocation. The second and third largest sector allocations are to energy (13.6%) and property construction (6.1%).The largest constituents are ICBC (10.4%), CCB (10.2%), Bank of China (9.8%) Ping An (7.7%) and Sinopec (6.2%).
The HSCEI Leveraged Index delivers the doubled daily return of the underlying HSCEI while taking interest expenses and stamp duty into consideration.
The HSCEI Short and Leveraged Indices were created in view of growing demand for customised investment strategies in the region. The new ETFs will bring the number of ETFs linked to indices in the Hang Seng family of indices to 43, with listings on 17 different stock exchanges across the world, and a combined assets under management of $25bn.
Taiwan has been a leader amongst its regional emerging market counterparts in the adoption and use of inverse and leveraged ETF products. Trading volume in ETFs in Taiwan increased by 45% between October 2014 and April 2016, driven by strong demand for these specialized products, according to research from global analytics firm Cerulli Associates. The number of S&L funds in Taiwan increased from four to ten during 2015 and attracted $1.7bn in net inflows.
The in-development ETFs will join other inverse and leveraged products launched recently by Fubon Asset Management, including the Fubon Topix Leveraged 2X Index ETF and Fubon Topix Inverse -1X Index ETF, which provide leveraged and inverse exposure to Japan’s TOPIX Index; and the Fubon NIFTY 2x Leveraged index ETF and Fubon NIFTY -1 Inverse ETF, which provide leveraged and inverse exposure to the Nifty 50 Index.
The TOPIX is a leading reference for Japanese equities representing over 1,800 companies listed on the Tokyo Stock Exchange.
The Nifty 50 Index is the premier equity benchmark of India and comprises 50 stocks, representing 13 sectors of the economy covering 65% free float market capitalization of the stocks listed on the National Stock Exchange of India.