Singapore readies new exotic ETFs to catch rivals

HONG KONG: Preparations are underway in Singapore for the first new listing of leveraged and inverse exchange-traded funds in almost eight years.

Singapore Exchange Ltd last week published a new web page about the products, described as “a form of passive collective investment schemes (like ETFs) and structured as open-end funds,” following revised guidelines from the Monetary Authority of Singapore in August.

Singapore, along with Hong Kong, is seeking to capture a bigger share of an expanding pie through types of funds that have seen success in Japan, Taiwan and Korea. Leveraged ETFs in Taiwan, which started in 2014, now have more than US$4.8bil in assets, according to data compiled by Bloomberg.

Daily trading of inverse and leveraged funds is more than half of Taiwan’s ETF market, said Andy Chang, president and CEO of Cathay Securities Investment Trust Co.

A leveraged ETF uses derivatives and debt to amplify the returns of an underlying index, while an inverse fund offers a way to profit from falling markets.

Firms in Hong Kong are eyeing a March start for the products linked to popular local gauges such as the Hang Seng Index, Bloomberg news reported last week.

“Due to the amplifying or inverse setup of these products, they have gained popularity in various markets, including Asia,” said Luuk Strijers, director and head of products at SGX. “Issuers have seen these products successfully take off in markets such as Japan and Taiwan.” – Bloomberg