Premia Partners launches Vietnam equity and US FRN ETFs in Hong Kong

Jul 18th, 2019 | By | Category: Alternatives / Multi-Asset

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Hong Kong-based asset manager Premia Partners has launched two new ETFs on the Hong Kong stock exchange, providing access to Vietnamese equities and US Treasuries.

Rebecca Chua, managing partner of Premia Partners

Rebecca Chua, Managing Partner of Premia Partners.

Vietnam equities

The Premia MSCI Vietnam ETF tracks the MSCI Vietnam Index through physical replication. The index tracks large- and mid-cap stocks listed on the Ho Chi Minh and Hanoi stock exchanges, representing around 85% of Vietnam’s total market cap.

But despite reflecting 85% of the Vietnamese equity market, the fund has considerable idiosyncratic risk.

The index is dominated by the real estate (45.5%) and consumer staples (30.2%) sectors and comprises just 16 constituents, most notably Vingroup (22.0%), Vietnam Dairy (17.8%), and Vinhomes (12.7%).

The fund comes with an expense ratio of 0.75% and is available to trade in Hong Kong dollars or US dollars under the tickers 2804 HK and 9804 HK, respectively.

Its price tag is cheaper than the rival Xtrackers FTSE Vietnam Swap UCITS ETF (3087 HK) which costs 0.85%. The Xtrackers fund follows the FTSE Vietnam Index through indirect (swap-based) replication.

US Treasuries

The Premia US Treasury Floating Rate ETF provides exposure to Floating Rate Notes (FRNs) issued by the US government.

FRNs are debt securities whose coupon payments are reset periodically and pay a predetermined spread over a short-term interest rate. This feature allows FRNs to be used as tools to reduce overall interest rate risk exposure within fixed income portfolios.

The security type, which was first offered by the US Treasury in 2014, can help bridge an important gap between short-maturity Treasury bills that do not offer coupon payments and longer-maturity, fixed-rate Treasury bonds.

The notes pay a quarterly coupon tied to the highest accepted discount rate of the most recent 13-week Treasury bill auction. The coupon of the note will update with each Monday auction of a 13-week Treasury bill, with the reset being effective the next day.

The fund, which is the first ETF in Hong Kong to target US FRNs, gains its exposure by tracking the Bloomberg Barclays US Treasury Floating Rate Bond Index through physical replication. The index is composed of FRNs with a maturity of less than two years and is weighted by market value.

The fund comes with an expense ratio of 0.15% and is available to trade in Hong Kong dollars or US dollars under the tickers 3077 HK and 9077 HK, respectively.

Rebecca Chua, Managing Partner of Premia Partners, commented, “We are delighted to launch the world’s first MSCI Vietnam ETF and Asia’s first US Floating Rate Treasury ETF, facilitating investors with efficient market access and liquidity management tools as they position for opportunities amid market uncertainties, global supply chain reconfiguration, and new trade pacts including CPTPP and FTA with Vietnam.

“Similar to our China A, Emerging ASEAN, and Asia Innovative Technology ETFs, these ETFs are built with international institutional standards in mind, incorporating features that specifically solve pain points expressed by clients.”

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