HSBC appointed by BlackRock for first master-feeder ETF in Hong Kong

The new ETF follows a ruling from Hong Kong’s SFC which relaxes rules for the master-feeder regime in the territory.

By Joe Parsons

HSBC has been appointed the global custodian and trustee for the first domiciled master-feeder exchange traded fund (ETF) structure in Hong Kong, which has been launched by BlackRock.

The new iShares MSCI Emerging Markets ETF (HK) was launched following a ruling from Hong Kong’s Securities and Futures Commission (SFC) which relaxes rules for the master-feeder regime in the territory.

The relaxation – announced last December – allows feeder structures to invest in overseas master ETFs, without the master ETF requiring to go through the SFC authorisation process. 

It is also the first locally domiciled Hong Kong ETF to track the MSCI Emerging Market Index and provides investors with additional investment opportunities.

“HSBC continues to be at the forefront of ETF developments in Hong Kong and in the region, working with issuers to launch new products and helping grow the ETF market,” the bank stated

Demand for ETFs across Asia is being driven by increasing internationalisation of asset allocation and the shift from active to index investing. In 2019, PwC forecast the adoption of index funds by investors in the Asia-Pacific region will rise from $1/5 trillion to more than $5 trillion within the next five years.

Hong Kong is establishing itself as the next investment hub to benefit from this trend and resonate with investors, due to its good governance and sound legal framework, in addition to its no capital gains tax, no income tax on dividends and no stamp duty on ETFs.

Adoption of the international central securities depository (ICSD) model is also gathering pace in Hong Kong, creating a global distribution network for UCITS ETFs.