The Stock Exchange of Hong Kong has welcomed its first ETF to provide exposure to changes in iron ore prices.
The fund is the first ETF in Hong Kong to provide exposure to iron ore futures.
The SSIF DCE Iron Ore Futures Index ETF tracks the DCE Iron Ore Futures Price Index, investing directly in renminbi-denominated, front-month iron ore futures contracts traded on China’s Dalian Commodity Exchange.
The listing’s sponsor is Shanxi Securities, marking the Hong Kong-based broker’s foray into the ETF arena.
The fund is available to trade in US dollars (9047 HK) or Hong Kong dollars (3047 HK) and comes with an expense ratio of 1.30%.
The ETF provides investors with the potential for portfolio diversification as well as an alternate play on economic activity in China – the world’s second-biggest economy is the largest producer of steel which is made directly from iron.
Haimo Zhang, Head of Asset Management at Shanxi Securities, said, “This ETF is considered to be an important strategy for internationalizing Chinese commodity futures. Although the fund is launched in the current challenging environment, we expect stable growth of the fund with a boom by the end of 2021.”
Chinese iron ore futures gained 1.5% on 31 March 2020, driven by hopes of global recovery after China reported an unexpected rise in factory output for March. Analysts are wary, however, noting that activity is still far below normal.
Hong Kong has taken several steps to advance its ETF market recently. Last year saw the introduction of the region’s first actively managed ETF as well as its first inverse leveraged ETP. Average daily trading volume for ETFs on the exchange in Q1 2020 is approximately $7.9 billion, up 71.7% year-over-year.
Brian Roberts, Head of Exchange Traded Products at Hong Kong stock exchange, commented, “We are excited to see the first listing of an iron ore ETF at HKEX, another important step forward in our commitment to build a vibrant and comprehensive ETF market in Hong Kong.
“With a continuously expanding portfolio of products, Hong Kong is fast-becoming Asia’s ETF hub, where investors can gain access to targeted exposure and complete their portfolio construction in one place.”