November 11, 2024 • 37 mins
Exchange-traded funds' (ETFs) first quarter century on Hong Kong Exchanges and Clearing (HKEX) has been a trailblazing run, punctuated by a parade of firsts: The advent of the Stock Connect cross-border trading program, Hong Kong's first cryptocurrency ETFs, and the arrival of popular leveraged and inverse products. But the early chapters in this partnership's story are still unfolding. The next 25 years promise even more changes and challenges as ETFs' global reach and capacity for innovation redraw the boundaries of what possible for investors. Brian Roberts, Managing Director, Head of Equities Product Development at HKEX sits down with Tiger Money co-hosts David Ingles and Rebecca Sin for a look at what lies ahead for ETFs, and how they might shape Hong Kong's investing future.
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Speaker 1 (00:00):
This podcast is brought to you by HKX, Asia's ETF marketplace. Well,
you'll find a gateway to liquidity and a diverse selection
of opportunities across asset classes, sectors and themes in Asia
and beyond. Search HKX to learn more.
Speaker 2 (00:17):
Good morning, good afternoon, good evening, and good nights wherever
in this fast, beautiful planet you're joining us from. Welcome
to Tiger Money, bloomber podcast about all things investing, with
a twist on exchange traded funds, in age and beyond.
Of course, keeping mind, money flows to where it's treated
the best. That is why global ets are on course.
Get this attract more than thirty five trillion dollars in
(00:40):
assets by twenty thirty five. To get a sense of
where we go from here. Thank you for joining us
on this episode of the Tiger Money Podcast. I'm your
host daviding Less, Chief Markets Editor for the Asia Pacific
and host of The China Show on Bloomberg TV, and
my co pilot is.
Speaker 3 (00:55):
I'm Rebecca Soon, head of Asia Pacific ETF Research at
Bloomberg Intelligence, or as David's to say, Tiger Mount ETFs
are marking their twenty fifth anniversary here in Hong Kong
in milestone that coincides with a ten year anniversary of
Hong Kong Stock Connect, a cross border trading link between
Hong Kong and mainland China. So with these two important
(01:15):
trading and investment anniversary, let's bring in Brian Roberts, head
of Equity Product Development at Hong Kong Exchange. It's important
for our listeners to know that Hong Kong Exchange is
a sponsor of Tiger Money. An interesting fact about Brian
is that he's passionate about American football and his favorite
team is a Green Bay Packers and they are a cheesehead.
For those that don't know what that is, it's a
(01:35):
hat in the shape of a cheese So welcome Brian
on Tiger Bunning.
Speaker 4 (01:39):
Thank you, And I do have to confess I actually
own one of the cheese wedge.
Speaker 5 (01:43):
Hats, so I'm a true Packers fan.
Speaker 2 (01:46):
Okay, And yeah, for our listeners, I guess that is
literally a cheese hat. That's not an insult, No, that's
an inside baseball vanter here to Brian.
Speaker 5 (01:53):
No exactly.
Speaker 4 (01:54):
And I'm from Wisconsin, so it just comes part and
parcel with being born and raised there.
Speaker 2 (01:59):
There we go the package. Brian, pleasure to have you
in the show and thanks for taking the time to
speak with us. And as Rebecca was pointing out, kwantum milestone,
you know, twenty five years since the first one was launched,
ten years of the stocknecking, which we'll you know, we'll
get to all of that throughout the course of the conversation,
but just tell us how you are, man. How has
this year been?
Speaker 4 (02:17):
Yeah, you know, I think this year it's been a
good year. It's been up and down, I think, you know,
overall we've seen sentiment in the market going up and
down as well. With that, you know, across our equity platform,
we've seen some really good resiliency and growth in that market,
especially around our single stock option platform. This is a
(02:37):
platform that is achieving record all time highs in terms.
Speaker 5 (02:41):
Of our average daily volume.
Speaker 4 (02:43):
ETFs continues to be a spotlight in our cash equity market.
We're now trading about fourteen percent of our cash equity
market through the end of September is really being driven
by ETFs and we just recently for ETFs crossed over
that two billion US dollar average day turnover for the
year through September. So this has been really a solid year.
(03:04):
I think for HKX. We've seen recently towards the end
Q four sentiment turning more positive into the equity markets
with some of the policy announcements coming from China, also
with interest rates reducing, and we've really seen a tremendous
rebound in our average daily turnover, the liquidity and our
cash equity market where we've achieved a number of all
(03:25):
time records for single day trading. So again, it's been
one of these years where there's been some good times,
a little bit slower times, but again I think we're
on into a nice little positive trajectory into the future.
Speaker 2 (03:38):
So it's an opportune time to talk about this. I mean,
there's the short term jubilation that we're seeing in markets.
We've barely had enough sleeve mon our team on The
China Show and Bloomberog TV of late, which is a
good thing because we've waited for this market turn for
such a long time and then suddenly it's come all
of a sudden. To help us understand how that affects
your world, Brian, I mean, oddly speaking, I think Hong
(04:01):
Kong sits I'm not mistaking number seven in terms of
AUM and the region. So give us the context and
also give us the nuance there on the ranking, and
is what's the plan to make it up that ladder?
Speaker 4 (04:13):
Yeah, I think again, like you said, a lot of
these rankings, they always need to have some context behind them.
You know, Hong Kong right now we sit seventh, as
you mentioned, in terms of assets under management, but in
terms of turnover we're number four. And also when a
metric that is very important to us is really the
turnover velocity. This is really when we look at it,
it's the efficiency in which we can provide liquidity to
(04:35):
the demand in the market, and we actually sit number
two in the region in terms of that.
Speaker 5 (04:40):
So these are very important metrics for us.
Speaker 4 (04:42):
And when again looking at rankings as a whole, I think,
especially with the fund management industry, you have to also
look at it in the context of the domestic local
population as well. Hong Kong is generally a very small population,
and I think Hong Kong as a whole generally will
punch above its weight class because for us, we have
(05:03):
to think about products different we have to distribute products differently.
So for us, I mean we have to draw investors
in across the region and really kind of serve as
a hub for ETFs here within the region, and I
think we do a really good job about that. We
create a very diverse platform. We're focused on creating efficient
supplies of liquidity, and that really is what.
Speaker 5 (05:26):
Kind of brings investors in.
Speaker 4 (05:27):
I think also with Hong Kong's low tax regime, this
provides advantages for investors within the region to potentially get
a more tax efficient structure than potentially going into other
international markets to get those kind of exposures. So again,
I think for us, it's just continue to do the
things that we've been doing, continue to innovate and iterate
on products, continue to improve the market structure, and just
(05:51):
continue to increase the awareness and the advantages of investing
in Hong Kong.
Speaker 5 (05:55):
Ets.
Speaker 2 (05:56):
That's extremely important that we qualify what type of market
Hong Kong is. You know, I'm just going to give
a random example here. I was having a conversation with
a buddy of mine. They're in the startup space, right
and you know, Hong Kong is a market where you
don't have this large domestic market for startups to gain scale.
Before they think about the next chapter, they immediately have
to think about the global context, the immediately out of
(06:18):
the gates. So we just mentioned AUM as a metric
that at least the news we like to cover because
that's easy to understand for viewers. But for someone like
you in the industry, what is a good metric that
you guys use as a business? So how do you
measure your progress and success?
Speaker 5 (06:33):
Yeah?
Speaker 4 (06:33):
I think for us we look at it in a
very balanced perspective. Right. AUM is important because as the
ETFs are growing and AUM is growing, more issuers will
come to this market. Existing issuers will continue to issue
more and more products and things along those lines. So
AUM is one metric. Turnover is another one, right, because
(06:53):
this is really the supply of liquidity that investors can
get access to. But I think the one thing, and
I kind of mentioned this just moments ago, is really
around the turnover velocity. And for us, we want to
have this balance kind of ecosystem where there's a good
asset base but also really strong turnover into the market.
And I think when you look across the Asia Pacific market,
(07:16):
you generally will see a lot of markets that have
high AUM, but generally a lot of them have lower liquidity,
and so they have lower kind of turnover velocity there,
and so you have to kind of look at it
around the efficiency in which you can trade ETFs, and
I think for us, that's where we want to create
this balance and have enough liquidity, having a very efficient
supply of liquidity into the market to really kind of
(07:39):
attract investors. And I think we've been able to find
a way to balance that very effectively. But again, when
I look back over the past six to seven years,
this was a very concerted effort by the industry to
bring out the products to change the market structure here
at the exchange that we were driving to make it
more efficient. And for us, now you know our turnover
(08:01):
velocity has more than doubled, so we know that we're
on the right track about creating a very efficient supply
of liquidity to meet that demand for investors.
Speaker 3 (08:10):
I remember you mentioned six or seven years ago, if
we look at the ETF that was trading on Hong
Kong Exchange, ninety percent of the trading volume was concentrated
on five names, and I think now as we look
at the ETF offering, it's a lot more diverse, and
those five names are no longer, taking ninety percent of
the market share. And so as we celebrate the twenty
(08:30):
fifth anniversary of ETFs on Hong Kong Exchange today. The
first ETF was a tracker fund two eight zero zero
HK that launched in nineteen ninety nine. It now has
twenty one billion US dollars in assets under management. For
our international audience, this would be equivalent to say, the
spy in the US. Where do you see the market growing?
One of our estimates was that the Hong Kong ETF
(08:50):
market could reach one hundred billion dollars in assets under
management by twenty thirty. But at the growth rate that
we're going, you know, currently we're already at seventy billion
dollars in assets under man management. I think last year
we were only at fifty billion. And so what do
you think the next twenty five years will look like,
both from an exchange perspective and where investors are going
to invest into?
Speaker 5 (09:10):
Well, I mean, yeah.
Speaker 4 (09:12):
Well, I feel like twenty five years it's a long time,
But I mean look, in twenty five years time, I
think Hong Kong will be very well cemented as the
regional hub for ETF trading. But you know, kind of
focusing on I think for us in the next five years,
our strategy is not changing, right. Our strategy has always
been really three pronged, which is around product innovation, market structure,
(09:35):
around just improving that trading efficiency, and then also around
increasing the awareness of Hong Kong ETFs to investors. So
that to us is really the recipe for success and
we're going to continue to implement that now. In terms
of getting to the AUM kind of estimations that you mentioned, Rebecca,
I think that's what we're all striving for, right. We
(09:56):
want to get to that one hundred billion dollar mark,
and we want to move on and go beyond that,
and I think we have the right ingredients for that
to happen. Just a couple of years ago, we launched
an introduced ETF Connect, which is the first mechanism that
really provides access into the mainland ETF market for international
investors to go there and then importantly for US southbound
(10:18):
investors in mainland to come here and trade our ETFs.
And we've really seen really good progress in.
Speaker 5 (10:24):
Traction with that.
Speaker 4 (10:26):
Earlier this year we made the changes that reduces some
of the criteria that's going to allow ETF issuers to
be able to bring out more diverse products to be
eligible for southbound ETF connects. So I think these are
all the right ingredients that we need to do to
help support that accelerated growth that we've been on. And again,
I think we have the right market structure to support
(10:47):
that liquidity coming in.
Speaker 3 (10:49):
So if we go off the connect that you just
mentioned for our listeners, it's ultimately a two way scheme
where people can trade Hong Kong, Shanghai, Shanjen through the
connect program. And so it's the tenth year anniversary of this.
It started in twenty fourteen with a stock connect.
Speaker 2 (11:06):
Yabe, it's been ten years. Yeah, I feel like I
just broke that headline literally last week of that opening up.
Speaker 5 (11:12):
Yeah, sorry, Rebecca.
Speaker 4 (11:13):
I just I can't believe it's twenty five years for ETFs.
I mean, just five years ago we were obviously just
kind of celebrating the twentieth anniversary. I just can't believe
how fast time it flies. It's like five years has
passed since then.
Speaker 2 (11:24):
So I hear this a lot, and I'm curious to
get your perspective on this too. You know, the more
that mainland China opens up its market. Paradoxically, like people
would think, oh, Hong Kong is going to lose its
status as a financial center because you do have the
big financial centers in mainland China, But paradoxically the more
important Hong Kong gets as a gateway to an opening
(11:45):
mainland China. And I'm wondering, how are you seeing that
from your end?
Speaker 4 (11:48):
Yeah, well, I think you know, Hong Kong and for
international investors, it really provides that access into the mainland market.
But I think importantly Hong Kong is going to serve
for main life and investors to get access to international
products and securities. You know, we've introduced the international stocks
or securities into Stock connect They're now eligible for that.
(12:11):
And I think ETFs, as we continue to improve and
reduce some of the eligibility criteria or enhance the eligibility criteria,
we're going to continue to see that. So's that's where
I kind of see Hong Kong. It's it's really this
super connector role that we play between East and West.
And again, I think as China continues to open up,
(12:31):
their capital is going to need to diversify and get
more exposure to international markets. And I think Hong Kong
is really going to be the place to be able
to serve those needs.
Speaker 3 (12:42):
So I think if we go back to stock Connect
and the importance and significance given that as a tenth
year anniversary, ETF connect was launched about two years ago,
what can we expect from stock Connect ETF Connect in
the next few years.
Speaker 4 (12:55):
Yeah, when you look at stock Connect as a whole,
this has been since it's come out over the decade,
it's been a constant evolution. Right. We have a history
of improving the universe, increasing the universe of the number
of securities, both in mainland and here in Hong Kong.
The same thing with ETF Connect, and we're going to
continue to do that. You know, we started out originally
(13:19):
being very domestic equity focused. Recently we lowered those eligibility criteria,
so now it's going to allow more international companies to
be included into the ETF Connect, so getting more broader
exposures there. So we're going to continue to iterate over
the next several years and continue to bring in more
and more diverse exposures for the mainland. That to me,
(13:41):
that's going to be the evolution. And then on top
of that, it's always about improving I say this a lot.
I'm an exchange person, so I talk about market structure
all the time, but it's really about how do you
continue to reduce the access barriers, how do you improve
the trading efficiency as well? And there's always been a
number of things that we've been doing on those perspectives
(14:01):
as well, So that's really going to be the main focus.
So again, the strategy for us just continues to remain
the same and it's been tried and true. But you know,
that's the direction of travel for connect Eventually it should
be fully open at some point.
Speaker 2 (14:16):
And I guess somewhat there is a competitive element to
when you look at exchanges across the region, right, whether
that's Hong Kong Exchanges, Singapore, you know your counterparts in
Shanghai and Hinjen, And wondering do you feel it's it's
a competitive dynamic you guys have with your mainline counterparts
or is it more collaborative and in one sense of
creating this sort of greater ecosystem. I'm wondering how you feel.
Speaker 5 (14:38):
Yeah, I mean no, I think it's completely collaborative.
Speaker 4 (14:41):
You know, when we're creating ETF connects, stock connect, you know,
things along all these different connect programs. So it is
collaborative because it's mutually beneficial to both markets. Right, we're
bringing in a tremendous amount of international capital into their
equity market. At the same time, we're providing act access
for mainland investors for the China investors to be able
(15:03):
to diversify their portfolios into the Hong Kong market, whether
or not it's through Hong Kong listed ETFs or Hong
Kong listed stock. So I do think this is very
much a collaborative effort and mutually beneficial to both markets.
And I think just on kind of clothes on that,
I think it's been mutually beneficial, but it's also been
transformative for both sides as well, having these programs and
(15:27):
doing so I think in a very well regulated fashion.
Speaker 3 (15:31):
So you mentioned the stock connect or an ETF connect
being fully transparent, fully open for international investors. Whether that's
from a product perspective, Hong Kong is the hub of
virtual assets for age specific. We have spot, we have leverage,
we have derivatives. How long do you think it'll take
stock connected ETF connect to be fully opened to allow
(15:55):
crypto ETFs?
Speaker 4 (15:56):
Yeah, you know, when I was walking over here, I
dropped my crystal ball, so it's been completely shattered. So okay,
I don't have an answer to that. But when we're
having these discussions and how we can enhance the Connect
programs is we want to continue to expand the universe
and make more exposures, more securities available, both in mainland
(16:18):
China and also here in Hong Kong.
Speaker 5 (16:20):
So that's the game plan.
Speaker 4 (16:22):
We want to continue to move those conversations forward. But
in terms of when it will happen, no one has
a crystal ball at this point. But we're making the
right movements and having the right discussions. And again, I
think the trajectory of Stock Connect shows that it is
an evolution that is happening here and eventually we'll get there,
but we just don't know exactly when that will be.
Speaker 2 (16:43):
You know, I lost count already because as you point out,
you know, this is a constantly evolving story to Stock Connect.
To be more specific to our listeners and viewers, how
many stocks are part of this universe?
Speaker 4 (16:52):
Like?
Speaker 2 (16:53):
Either way, I'm not sure if they're phrasing the question
properly here. So, yeah, what can mainland investors buy in
Hong Kong. How many what's that investable universe.
Speaker 5 (17:00):
And vice versa.
Speaker 4 (17:02):
If coming southbound they have access to over five hundred
stocks coming here. Going northbound, it's roughly I think it's
over twenty two hundred stocks that are available in the mainland.
So you know when kind of focusing on the sheer
numbers is one thing, but also around the coverage of
market capitalization, right, so you're covering well over eighty percent
(17:24):
of both markets market capitalization. So it's a very broad
program as is, and this has been something that again
we've been striving for to do, and again as the
program has evolved, more and more securities have been included.
Speaker 3 (17:40):
I think if we look at ETF connect for one,
there's more than two hundred ETFs and on the other
one there's maybe seventeen. Indians are looking to add to that,
and I think with the new change that you mentioned
with lowering the threshold and having more international names, that
will definitely help in terms of ETF offering that's available
for investment.
Speaker 2 (17:58):
Well, I'm just curious and I'm not sure sure there's
an answer to this question. Actually, So if I'm an
ETF issuer and obviously my end game is AUM and flow.
How do I raise my hand to be part of
this or like where does that you know, to get
bumped up in the league tables?
Speaker 4 (18:12):
As they say, Yeah, well, I mean for this, we
have a prescribed criteria to be included in ETF connect
and so for that you can have up to forty
percent of your ETF being exposed to international equities.
Speaker 5 (18:26):
There's a minimum AUM threshold.
Speaker 4 (18:29):
Which is about five hundred and fifty million Hong Kong
dollars for southbound for ETFs in Hong Kong to be
eligible up there, and then there's a listing period of time.
Speaker 5 (18:40):
That you need to be available, which is six months.
Speaker 4 (18:42):
So there's a whole set of criteria that ETF issuers.
It's fully transparent that it's out there for them to see,
and once their ETF satisfies that, we do semi annual reviews,
so we will review those products every six months and
if you meet those criteria, you're in.
Speaker 5 (19:00):
And so that's that's how you get in.
Speaker 4 (19:01):
And it's the same way that it works for the
mainland issuers as well.
Speaker 2 (19:05):
Yeah, and in terms of just the bold spectrum of
product offering that we offer global investors in Hong Kong.
Speaker 5 (19:10):
Yeah, what do you think is lacking?
Speaker 2 (19:12):
Where's the gap? So we have everything from everything, you know,
I was talking to Rebecca earlier on. We have a
whole slew of inverse and bears BT you know ets
for example for hedging, we have I don't know, pick
your theme. Where do you see the most growth?
Speaker 4 (19:25):
A few areas that I think we could see some
more growth.
Speaker 5 (19:29):
I do think.
Speaker 4 (19:29):
Thematics and the levered in inverse space. I think there's
always going to be runaway there. I think one thing
with ETF issuers, they're never short of ideas.
Speaker 5 (19:38):
Oh yeah out there.
Speaker 2 (19:40):
Right, so not all It's almost like it's almost like
a party at two am. You ask anyone on any topic.
There there's a there's a there's an et there's an
ETF for that opinion.
Speaker 4 (19:50):
Yeah. Yeah, there's a lot of space out there. And
again I think issuers do a good job about innovating
and bringing out new products and things along those lines.
But again I think thematics and levered and inverts, especially
here in Asia, I think are going to be products
that are going to continue to drive the growth. But
still even just the core asset allocation products whether or
(20:11):
not it's fixed income, some of your global kind of
broader like emerging markets, global equities. Having some of those
products in here as well, I think will be especially
attractive to institutional investors in this region. So one of
the things that I always kind of look at and
I talk to etf issuers, especially in the US and Europe,
is you know, there's not a lot of white space
(20:33):
in those markets, right, but when you come to Asia,
and this isn't just Hong Kong, when you come into
Asia as a whole, there is a lot of I
think open white space for product innovation and that you
can actually realize here Compared to a lot of these
other markets that I think are very very concentrated and
just trying to kind of carve out a niche in Europe,
(20:55):
in the US, I think it's very very difficult, and
that's where you see the flows in the US. It's
it's still very very concentrated. It's going to the top one, two,
three etf issuers into the top five ten products, and
here I think you have the ability to really innovate
and bring out some interesting products and have some clear
white space from a competitive standpoint.
Speaker 1 (21:16):
This podcast is brought to you by HKX Asia's ETF marketplace,
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Speaker 3 (21:33):
So if we switch gears to the Middle East, this
is obviously a huge importance to the Hong Kong and
China market. We've just had two ETF's list in Saudi
Arabia tracking Hong Kong shares raising more than one billion
dollars in assets. Where do you see this market going
and what's the importance on Hong Kong exchange. You've added
the Saudi Exchange as one of your recognized stock exchange
(21:55):
last year. So where do you see the significance of
the Middle East? Houses is going to impact Hong Kong?
What's its potential and is this a game changer in
your opinion?
Speaker 4 (22:04):
Well, I think first the one thing that Hong Kong
and HKUX does really well is we build connections. And
you know when we were talking about this earlier around
Hong Kong kind of punching above its weight class. This
is how we do it right. This has really been
you know, the key ingredient for our successes. Building these connections. Again,
(22:24):
whether or not, it's the connect programs that we've been
talking a lot about, and this here is really a
product connection that we've been building and working through with
Saudi Arabia. You know, late last year CSOP they launched
the world's largest Saudi Arabia ETF here. It's now about
one point two one point three billion US dollars of assets,
so it continues to grow. And now that product has
(22:46):
also been listed in mainland as well through a master
feeder structure. This here is really the next connection for
Hong Kong to continue to connect Asia capital into the
Middle East and then also help Middle East capital connect
here into Asia as well. So there's two ETFs that
you mentioned that were listed, one by Hang Saying, the
(23:07):
other by CSOP with their partners in the Middle East.
And again I think these are just important connections that
these markets are continuing to build. And I think that
is really what HKX and what Hong Kong just continues
to do really really well. It's build these market connections
with all the markets that are out there.
Speaker 5 (23:27):
Interesting.
Speaker 2 (23:28):
I remember I was having a conversation with the CEO
of Money China a few weeks back, and she mentioned
that more than being an exchange, you guys are really
a tech company if you think about it. You know,
the engineering that needs to be in place for the
world to see the fancy stuff.
Speaker 5 (23:44):
Yeah.
Speaker 2 (23:44):
The reason I bring that up is you guys are
almost at the frontier of many of the different business
areas that you're in, So it's almost like you're a
consultant number one when you deal with all your partnerships
in the mainland or across the region Middle East, Southeast Asia.
Speaker 5 (24:00):
Bring that up as well.
Speaker 2 (24:01):
If budget was no issue, if you're unrestrained by policy
on the other side of the table, for example, what
do you think you'd want to put in place, Like
what is that dream project that you think will be
better for everyone else if that was in place? Like
is it a stock connect for all? Is it's let's
bring spy to Hong Kong? You know what's that wish list?
Speaker 4 (24:25):
You know? I guess first to Bonnie's comment, I didn't
hear it, but I do agree. I think exchanges are
technology companies. I mean, yes, you trade securities and different
things along those lines, but at the core of what
we do and the backbone of it all is really
having extremely efficient technology for capital to meet with opportunities.
Speaker 5 (24:46):
So I think that's the first part.
Speaker 4 (24:48):
Now, if there are things out there that you know,
no budget and whatever it is that we need to
bring here in different things along those lines. To me,
I actually don't think it's really a technological innovation and
different things along those lines. Is if I could just
wave a magic wand I would have all the products,
the ETF products you mentioned, SPY, you know, QQQ, you
(25:09):
have all these very well known liquid products. I would
just put them here in the Hong Kong market and
you just have one market here for Asia Pacific for
investors to trade whatever exposures they want. So to me,
that would be the way to do it, you know,
is just have all the products that you can ever imagine,
(25:30):
you just put it in and be this one stop
shop for.
Speaker 5 (25:32):
All the investor needs.
Speaker 4 (25:34):
So to me, that would be what I would kind
of think as what we would want, at least from
my perspective.
Speaker 2 (25:40):
Well, thank goodness. Then the ETF providers are all very
creative thinkers. Here's here's what I think you guys need.
Speaker 5 (25:47):
Yeah, everything, here's here's everything.
Speaker 4 (25:50):
I mean, that's the thing for you know, be in exchange, right,
you're really a marketplace. Right. We provide the marketplace for
issuers to list, race capital, raise assets under management, be
creative in the market. We provide the infrastructure for liquidity
to be provided for investors come in and get those
(26:10):
access you know. So for us, we want to be
this one stop shop for all the kind of the
trading and the clearing, the product and the services needs
for investors here. So that's I think the beauty of
being the marketplace. You just want to have everything here
and let investors, you know, choose what they're interested in.
Speaker 2 (26:28):
And I'm wondering, do you get frustrated sometimes there are
things that are obviously beyond your control. You can build
the platform, you can design it perfectly. And then we
were talking earlier on right like this year has been
in terms of market sentiment has been challenging, and suddenly
things have turned and suddenly there's all this money coming
in and suddenly you're seeing your products run. Yeah, And
(26:51):
I'm wondering, at some point you get frustrated sometimes because
there are things that are simply beyond your control. You know,
that is the nature Well, the market. You can design
that's good a product as you want, but.
Speaker 4 (27:00):
Well, it's the fact of life. I mean, there's always
things that are beyond your control. But I think for
us and at HKX and within equity product development, we
always have to just remain focus on the things that
you can control. And one of the things you cannot
control is market sentiment and things along those lines. Every
market goes through peaks and valleys. Right sentiment is positive,
(27:23):
sentiment turns not so positive, and things along those lines.
But from an exchange standpoint, we always have to be
looking at how do we provide the right infrastructure, how
do we provide that right structure so when things do turn,
investors can capitalize on them. And I think a lot
of the things that we've been doing over the past
(27:44):
call it eighteen twenty four months, has really been improving
a lot of the infrastructure. We've rolled out for more
of the high frequency traders, a self match prevention kind
of trading mechanism. We just closed up the consultation and
the cash equity market to reduce the minimum tick sizes
or the minimum spreads. So hopefully when we roll that
out next year to be able to compress trading spreads
(28:07):
into the market. So there's all these things that we
just continue to do because you just never know when
the market is going to turn and liquidity is just.
Speaker 5 (28:16):
Going to come through.
Speaker 4 (28:16):
I mean we saw that again in late Q three
towards the end of September into Q four, where you
have this massive rush of liquidity and you just always
need to be ready and iterating on that.
Speaker 2 (28:27):
Yeah, I mean people look up to you, guys. You
know this, the things will go unnamed. It was a
conversation I was having years back, and I think it
was it was still I think under Gucco where this
exchange basically said, can you put us in touch with
HCX because they had the best practices when it comes
to XXX, and we were happy to make that connection.
(28:48):
And I think to your point, right, and I'm wondering,
I think your ant did already. The last eighteen months
has been challenging, but that doesn't seem to have deterred
you guys in terms of fixing the roof and fixing
the plumbing, Yeah, fixing the pipe, Yeah, you.
Speaker 5 (29:00):
Have to be doing that at all times.
Speaker 4 (29:02):
Is I do think that HKX sets a global standard
for how exchanges can and should operate in terms of
the infrastructure, the regulations and things along those lines.
Speaker 5 (29:14):
It doesn't mean we're perfect, right.
Speaker 4 (29:15):
I Mean, if we were, then we wouldn't have to
be constantly iterating. But all exchanges, or a lot of
the really good exchanges, are constantly finding ways to improve
their infrastructure, their technology, the overall market structure to make
it easier for investors and people to access liquidity. So yeah,
you just continue day in and day out to improve
(29:36):
and again, don't focus so much on the things you
can't control, which is market sentiment. Focus on the things
that you can, which is our actions and the initiatives
that we can do to make it a better investor
in trading environment.
Speaker 3 (29:48):
So, speaking about fixing exchanges, other exchanges have crashed had problems,
but Hong Kong Exchange hasn't recently. Why do you think
you guys were able to avoid this when other exchanges,
especially in times of volatility or when there's a lot
of trading volume, which we've had recently.
Speaker 4 (30:04):
Look, I'm not going to get into what happened in
other exchanges and diagnose their problems or their challenges or issues,
you know, I think what's core to us is operating
a resilient market, and that is effectively what we do,
and that is at the forefront of it, in making
(30:24):
sure that we have the right infrastructure, the right market
structure in place, the right risk management in place as well,
you know, and how we handle that, how we collateralize
and margin on the derivative side, and things along those lines.
So again, it's an iterative thing. It's been something that
we've been evolving and trying to perfect over the years.
(30:48):
And again that's I think for us, we just we
have a tremendous amount of pride and just operating a
very resilient and vibrant market for ourselves.
Speaker 3 (30:58):
We always get this question, but how how do you
select an ETF ticker on Hong Kong Exchange.
Speaker 4 (31:04):
Well, for anyone, there is a little bit of a process,
you know. I remember back when I was on the
ETF issuer side and we were listening some ETFs on HKX.
I found it to actually be a very interesting process
because you go into a room, you pick out some
ping pong balls that correspond to stock codes that are
(31:25):
available for ets. And so you go in there and
you pick out five ping pong balls, again correspond to
a set of stock codes, and then you get those
five stock codes and you pick them.
Speaker 5 (31:38):
You pick one from there, okay.
Speaker 4 (31:40):
Right at the exchange, we have a predetermined like range
of stock codes for ETFs that are generally starting with
two or three and things along those lines. So the
range is predefined, and that's how we do it. Is
it's through this lottery kind of system. That's the standard way. Now,
the other way you leave it up to face, when
you leave it up to fate, okay, right, and you're
(32:02):
really going to roll the dice and picked out the
ping pong balls and things along those lines. But the
other way to do it is you can make a
charitable contribution to the HKX Foundation and you can make
that charitable contribution and then you get to pick your
stock code from that predetermined range of stock codes. So
there's two different ways to do it. You know, if
you want to leave it up to fate, you can
(32:23):
do that. If you want to make a charitable contribution
and control your destiny and control your fate, you can
do it that way as well.
Speaker 2 (32:29):
So if I've always had my eye on one HK
C K Hutch, if I suddenly woke up the next
morning I wanted a lottery, I had one hundred billion
dollars and I went, Brian, can you take this to
your team? I want one hk Is there a way
that you guys can make that happen.
Speaker 4 (32:48):
Well, I would generally say, you cannot take someone else's
stock code. Okay, that is listed, but you need to
go talk to them, not the that's right, whether or
not they want to tell you them, to them, right,
and say you have one hundred billion dollars and you
want stock code one.
Speaker 3 (33:04):
So an interesting fact is Meta was actually owned by
an ETF Fisher round Hill Ball, and they had that ticker,
and Mark Zuckerberg wanted it, and so they paid I
think it was maybe sixty million was what the rumored
amount was.
Speaker 5 (33:21):
Only I have one hundred billion.
Speaker 3 (33:23):
Get that ticker, and then they that ETF then became
m et V as opposed to m et A.
Speaker 4 (33:30):
Yeah, I mean a one hundred billion dollars, there's a
lot of money. I figure they will, they might, they
might consider it, they'll at.
Speaker 5 (33:36):
Least entertain a conversation, but.
Speaker 2 (33:38):
Then money, I guess, goes to them and not you guys.
Speaker 4 (33:40):
Right, Yeah, No, well it purely because it's there, It's
this is purely theoretical.
Speaker 5 (33:46):
I would assume it would need to go to them.
Speaker 4 (33:48):
But again, we've never had these situations where someone is
I mean generally you're not seeing someone going in and
acquiring someone else's stock.
Speaker 5 (33:56):
Yeah, I've always had my eye.
Speaker 4 (33:57):
You know.
Speaker 2 (33:57):
Another thing that's also come up, and you can chime
in if you if you choose to a friend of
mine in the US said, why are your tickers in
the Asia Pacific? Why are they all numbers? You look
at Japan, you look at Korea. You know. The sad
thing about working in a data company is on day two,
I know what seven hundred HK is. Yeah, I would
know what zero zero five nine three zero k as
(34:18):
that sounds. In electronics, has there ever been a point
where we toured with the idea of going from numbers
to letters at some point.
Speaker 4 (34:25):
Well, you know, I came to Hong Kong over twelve
years ago.
Speaker 5 (34:30):
That was probably.
Speaker 4 (34:32):
I would say one of my biggest challenges was just
keeping all the numbers straight, because you know, in the
US and a lot of the western markets, they use
the alphabet, and it's just it's very kind of intuitive
intuitive that way, at least for me, because that's the
way I've been programmed. But I feel like in Asia,
numbers are very very important here, right the number eight.
(34:52):
I mean, you know, all of these numbers have very
symbolic and sentimental reasons behind it and across the Asian markets,
and to me, that's the reason why we use numbers
over the alphabets out here. So I think it's just
purely as simple as that. But I could be wrong.
You know, I wasn't the one that kind of invented it,
(35:14):
but given that most of the Asian markets are using numbers,
I would probably assume it's because of the symbolic meaning
behind numbers here and how you can pare them up
together and different things along those lines, like the meaning
of two A two eight and all that kind of stuff.
I think, and issuers really kind of look at these numbers,
I know, when we're talking to etf issuers and they're
(35:36):
getting their stock codes and different things along those lines,
and you know, people will ask, do I have to
have this one right because you know it has a
four in it or something along this line. So yeah,
there's I think the meaning behind numbers is very compelling
and meaningful here in Asia compared to the US.
Speaker 2 (35:55):
And you know, ironically enough, your possibilities are literally infinite
when we deal with numbers.
Speaker 4 (36:01):
Here, well, it becomes constrained by how many numbers we
can actually have in a stock code.
Speaker 5 (36:06):
But is there a limit, uh, yeah.
Speaker 4 (36:08):
Generally or is it about in the Hong Kong cases. No,
I mean you can go up to like I think
we can go up to like ninety nine thousand or
something like that. So I mean it's not like infinite infinite,
but like yeah, I mean at the end of the day,
I mean you can always just increase it if we
need it to.
Speaker 3 (36:24):
But yeah, do you have a favorite ticker?
Speaker 2 (36:27):
I love all the ETFs equally, Well one HK my
eyes on.
Speaker 5 (36:34):
You just need a hundred billion? Just I need a
hundred billion.
Speaker 2 (36:37):
Here we go, Brian, it's fantastic. Thank you for spending
the time and being a good sport and bantering with
us here in our latest episode of Tiger Money podcast.
That was Brian Roberts ahead of Equities at HK. It's Rebecca,
thank you.
Speaker 3 (36:50):
For listening to Tiger Money, your Bloomberg podcast about investing
funds and the financial market in Asia and beyond. If
you like what you hear, don't forget to subscribe, like share,
or leave us a we would love to hear from you.
Until next time. You can find us inside the Bloomberg
terminal or LinkedIn. This podcast was produced by Clara Chan
This podcast is brought to you by HKX, Asia's ETF marketplace. Well,
you'll find a gateway to liquidity and a diverse selection
of opportunities across asset classes, sectors and themes in Asia
and beyond. Search HKX to learn more.
Speaker 2 (00:17):
Good morning, good afternoon, good evening, and good nights wherever
in this fast, beautiful planet you're joining us from. Welcome
to Tiger Money, bloomber podcast about all things investing, with
a twist on exchange traded funds, in age and beyond.
Of course, keeping mind, money flows to where it's treated
the best. That is why global ets are on course.
Get this attract more than thirty five trillion dollars in
(00:40):
assets by twenty thirty five. To get a sense of
where we go from here. Thank you for joining us
on this episode of the Tiger Money Podcast. I'm your
host daviding Less, Chief Markets Editor for the Asia Pacific
and host of The China Show on Bloomberg TV, and
my co pilot is.
Speaker 3 (00:55):
I'm Rebecca Soon, head of Asia Pacific ETF Research at
Bloomberg Intelligence, or as David's to say, Tiger Mount ETFs
are marking their twenty fifth anniversary here in Hong Kong
in milestone that coincides with a ten year anniversary of
Hong Kong Stock Connect, a cross border trading link between
Hong Kong and mainland China. So with these two important
(01:15):
trading and investment anniversary, let's bring in Brian Roberts, head
of Equity Product Development at Hong Kong Exchange. It's important
for our listeners to know that Hong Kong Exchange is
a sponsor of Tiger Money. An interesting fact about Brian
is that he's passionate about American football and his favorite
team is a Green Bay Packers and they are a cheesehead.
For those that don't know what that is, it's a
(01:35):
hat in the shape of a cheese So welcome Brian
on Tiger Bunning.
Speaker 4 (01:39):
Thank you, And I do have to confess I actually
own one of the cheese wedge.
Speaker 5 (01:43):
Hats, so I'm a true Packers fan.
Speaker 2 (01:46):
Okay, And yeah, for our listeners, I guess that is
literally a cheese hat. That's not an insult, No, that's
an inside baseball vanter here to Brian.
Speaker 5 (01:53):
No exactly.
Speaker 4 (01:54):
And I'm from Wisconsin, so it just comes part and
parcel with being born and raised there.
Speaker 2 (01:59):
There we go the package. Brian, pleasure to have you
in the show and thanks for taking the time to
speak with us. And as Rebecca was pointing out, kwantum milestone,
you know, twenty five years since the first one was launched,
ten years of the stocknecking, which we'll you know, we'll
get to all of that throughout the course of the conversation,
but just tell us how you are, man. How has
this year been?
Speaker 4 (02:17):
Yeah, you know, I think this year it's been a
good year. It's been up and down, I think, you know,
overall we've seen sentiment in the market going up and
down as well. With that, you know, across our equity platform,
we've seen some really good resiliency and growth in that market,
especially around our single stock option platform. This is a
(02:37):
platform that is achieving record all time highs in terms.
Speaker 5 (02:41):
Of our average daily volume.
Speaker 4 (02:43):
ETFs continues to be a spotlight in our cash equity market.
We're now trading about fourteen percent of our cash equity
market through the end of September is really being driven
by ETFs and we just recently for ETFs crossed over
that two billion US dollar average day turnover for the
year through September. So this has been really a solid year.
(03:04):
I think for HKX. We've seen recently towards the end
Q four sentiment turning more positive into the equity markets
with some of the policy announcements coming from China, also
with interest rates reducing, and we've really seen a tremendous
rebound in our average daily turnover, the liquidity and our
cash equity market where we've achieved a number of all
(03:25):
time records for single day trading. So again, it's been
one of these years where there's been some good times,
a little bit slower times, but again I think we're
on into a nice little positive trajectory into the future.
Speaker 2 (03:38):
So it's an opportune time to talk about this. I mean,
there's the short term jubilation that we're seeing in markets.
We've barely had enough sleeve mon our team on The
China Show and Bloomberog TV of late, which is a
good thing because we've waited for this market turn for
such a long time and then suddenly it's come all
of a sudden. To help us understand how that affects
your world, Brian, I mean, oddly speaking, I think Hong
(04:01):
Kong sits I'm not mistaking number seven in terms of
AUM and the region. So give us the context and
also give us the nuance there on the ranking, and
is what's the plan to make it up that ladder?
Speaker 4 (04:13):
Yeah, I think again, like you said, a lot of
these rankings, they always need to have some context behind them.
You know, Hong Kong right now we sit seventh, as
you mentioned, in terms of assets under management, but in
terms of turnover we're number four. And also when a
metric that is very important to us is really the
turnover velocity. This is really when we look at it,
it's the efficiency in which we can provide liquidity to
(04:35):
the demand in the market, and we actually sit number
two in the region in terms of that.
Speaker 5 (04:40):
So these are very important metrics for us.
Speaker 4 (04:42):
And when again looking at rankings as a whole, I think,
especially with the fund management industry, you have to also
look at it in the context of the domestic local
population as well. Hong Kong is generally a very small population,
and I think Hong Kong as a whole generally will
punch above its weight class because for us, we have
(05:03):
to think about products different we have to distribute products differently.
So for us, I mean we have to draw investors
in across the region and really kind of serve as
a hub for ETFs here within the region, and I
think we do a really good job about that. We
create a very diverse platform. We're focused on creating efficient
supplies of liquidity, and that really is what.
Speaker 5 (05:26):
Kind of brings investors in.
Speaker 4 (05:27):
I think also with Hong Kong's low tax regime, this
provides advantages for investors within the region to potentially get
a more tax efficient structure than potentially going into other
international markets to get those kind of exposures. So again,
I think for us, it's just continue to do the
things that we've been doing, continue to innovate and iterate
on products, continue to improve the market structure, and just
(05:51):
continue to increase the awareness and the advantages of investing
in Hong Kong.
Speaker 5 (05:55):
Ets.
Speaker 2 (05:56):
That's extremely important that we qualify what type of market
Hong Kong is. You know, I'm just going to give
a random example here. I was having a conversation with
a buddy of mine. They're in the startup space, right
and you know, Hong Kong is a market where you
don't have this large domestic market for startups to gain scale.
Before they think about the next chapter, they immediately have
to think about the global context, the immediately out of
(06:18):
the gates. So we just mentioned AUM as a metric
that at least the news we like to cover because
that's easy to understand for viewers. But for someone like
you in the industry, what is a good metric that
you guys use as a business? So how do you
measure your progress and success?
Speaker 5 (06:33):
Yeah?
Speaker 4 (06:33):
I think for us we look at it in a
very balanced perspective. Right. AUM is important because as the
ETFs are growing and AUM is growing, more issuers will
come to this market. Existing issuers will continue to issue
more and more products and things along those lines. So
AUM is one metric. Turnover is another one, right, because
(06:53):
this is really the supply of liquidity that investors can
get access to. But I think the one thing, and
I kind of mentioned this just moments ago, is really
around the turnover velocity. And for us, we want to
have this balance kind of ecosystem where there's a good
asset base but also really strong turnover into the market.
And I think when you look across the Asia Pacific market,
(07:16):
you generally will see a lot of markets that have
high AUM, but generally a lot of them have lower liquidity,
and so they have lower kind of turnover velocity there,
and so you have to kind of look at it
around the efficiency in which you can trade ETFs, and
I think for us, that's where we want to create
this balance and have enough liquidity, having a very efficient
supply of liquidity into the market to really kind of
(07:39):
attract investors. And I think we've been able to find
a way to balance that very effectively. But again, when
I look back over the past six to seven years,
this was a very concerted effort by the industry to
bring out the products to change the market structure here
at the exchange that we were driving to make it
more efficient. And for us, now you know our turnover
(08:01):
velocity has more than doubled, so we know that we're
on the right track about creating a very efficient supply
of liquidity to meet that demand for investors.
Speaker 3 (08:10):
I remember you mentioned six or seven years ago, if
we look at the ETF that was trading on Hong
Kong Exchange, ninety percent of the trading volume was concentrated
on five names, and I think now as we look
at the ETF offering, it's a lot more diverse, and
those five names are no longer, taking ninety percent of
the market share. And so as we celebrate the twenty
(08:30):
fifth anniversary of ETFs on Hong Kong Exchange today. The
first ETF was a tracker fund two eight zero zero
HK that launched in nineteen ninety nine. It now has
twenty one billion US dollars in assets under management. For
our international audience, this would be equivalent to say, the
spy in the US. Where do you see the market growing?
One of our estimates was that the Hong Kong ETF
(08:50):
market could reach one hundred billion dollars in assets under
management by twenty thirty. But at the growth rate that
we're going, you know, currently we're already at seventy billion
dollars in assets under man management. I think last year
we were only at fifty billion. And so what do
you think the next twenty five years will look like,
both from an exchange perspective and where investors are going
to invest into?
Speaker 5 (09:10):
Well, I mean, yeah.
Speaker 4 (09:12):
Well, I feel like twenty five years it's a long time,
But I mean look, in twenty five years time, I
think Hong Kong will be very well cemented as the
regional hub for ETF trading. But you know, kind of
focusing on I think for us in the next five years,
our strategy is not changing, right. Our strategy has always
been really three pronged, which is around product innovation, market structure,
(09:35):
around just improving that trading efficiency, and then also around
increasing the awareness of Hong Kong ETFs to investors. So
that to us is really the recipe for success and
we're going to continue to implement that now. In terms
of getting to the AUM kind of estimations that you mentioned, Rebecca,
I think that's what we're all striving for, right. We
(09:56):
want to get to that one hundred billion dollar mark,
and we want to move on and go beyond that,
and I think we have the right ingredients for that
to happen. Just a couple of years ago, we launched
an introduced ETF Connect, which is the first mechanism that
really provides access into the mainland ETF market for international
investors to go there and then importantly for US southbound
(10:18):
investors in mainland to come here and trade our ETFs.
And we've really seen really good progress in.
Speaker 5 (10:24):
Traction with that.
Speaker 4 (10:26):
Earlier this year we made the changes that reduces some
of the criteria that's going to allow ETF issuers to
be able to bring out more diverse products to be
eligible for southbound ETF connects. So I think these are
all the right ingredients that we need to do to
help support that accelerated growth that we've been on. And again,
I think we have the right market structure to support
(10:47):
that liquidity coming in.
Speaker 3 (10:49):
So if we go off the connect that you just
mentioned for our listeners, it's ultimately a two way scheme
where people can trade Hong Kong, Shanghai, Shanjen through the
connect program. And so it's the tenth year anniversary of this.
It started in twenty fourteen with a stock connect.
Speaker 2 (11:06):
Yabe, it's been ten years. Yeah, I feel like I
just broke that headline literally last week of that opening up.
Speaker 5 (11:12):
Yeah, sorry, Rebecca.
Speaker 4 (11:13):
I just I can't believe it's twenty five years for ETFs.
I mean, just five years ago we were obviously just
kind of celebrating the twentieth anniversary. I just can't believe
how fast time it flies. It's like five years has
passed since then.
Speaker 2 (11:24):
So I hear this a lot, and I'm curious to
get your perspective on this too. You know, the more
that mainland China opens up its market. Paradoxically, like people
would think, oh, Hong Kong is going to lose its
status as a financial center because you do have the
big financial centers in mainland China, But paradoxically the more
important Hong Kong gets as a gateway to an opening
(11:45):
mainland China. And I'm wondering, how are you seeing that
from your end?
Speaker 4 (11:48):
Yeah, well, I think you know, Hong Kong and for
international investors, it really provides that access into the mainland market.
But I think importantly Hong Kong is going to serve
for main life and investors to get access to international
products and securities. You know, we've introduced the international stocks
or securities into Stock connect They're now eligible for that.
(12:11):
And I think ETFs, as we continue to improve and
reduce some of the eligibility criteria or enhance the eligibility criteria,
we're going to continue to see that. So's that's where
I kind of see Hong Kong. It's it's really this
super connector role that we play between East and West.
And again, I think as China continues to open up,
(12:31):
their capital is going to need to diversify and get
more exposure to international markets. And I think Hong Kong
is really going to be the place to be able
to serve those needs.
Speaker 3 (12:42):
So I think if we go back to stock Connect
and the importance and significance given that as a tenth
year anniversary, ETF connect was launched about two years ago,
what can we expect from stock Connect ETF Connect in
the next few years.
Speaker 4 (12:55):
Yeah, when you look at stock Connect as a whole,
this has been since it's come out over the decade,
it's been a constant evolution. Right. We have a history
of improving the universe, increasing the universe of the number
of securities, both in mainland and here in Hong Kong.
The same thing with ETF Connect, and we're going to
continue to do that. You know, we started out originally
(13:19):
being very domestic equity focused. Recently we lowered those eligibility criteria,
so now it's going to allow more international companies to
be included into the ETF Connect, so getting more broader
exposures there. So we're going to continue to iterate over
the next several years and continue to bring in more
and more diverse exposures for the mainland. That to me,
(13:41):
that's going to be the evolution. And then on top
of that, it's always about improving I say this a lot.
I'm an exchange person, so I talk about market structure
all the time, but it's really about how do you
continue to reduce the access barriers, how do you improve
the trading efficiency as well? And there's always been a
number of things that we've been doing on those perspectives
(14:01):
as well, So that's really going to be the main focus.
So again, the strategy for us just continues to remain
the same and it's been tried and true. But you know,
that's the direction of travel for connect Eventually it should
be fully open at some point.
Speaker 2 (14:16):
And I guess somewhat there is a competitive element to
when you look at exchanges across the region, right, whether
that's Hong Kong Exchanges, Singapore, you know your counterparts in
Shanghai and Hinjen, And wondering do you feel it's it's
a competitive dynamic you guys have with your mainline counterparts
or is it more collaborative and in one sense of
creating this sort of greater ecosystem. I'm wondering how you feel.
Speaker 5 (14:38):
Yeah, I mean no, I think it's completely collaborative.
Speaker 4 (14:41):
You know, when we're creating ETF connects, stock connect, you know,
things along all these different connect programs. So it is
collaborative because it's mutually beneficial to both markets. Right, we're
bringing in a tremendous amount of international capital into their
equity market. At the same time, we're providing act access
for mainland investors for the China investors to be able
(15:03):
to diversify their portfolios into the Hong Kong market, whether
or not it's through Hong Kong listed ETFs or Hong
Kong listed stock. So I do think this is very
much a collaborative effort and mutually beneficial to both markets.
And I think just on kind of clothes on that,
I think it's been mutually beneficial, but it's also been
transformative for both sides as well, having these programs and
(15:27):
doing so I think in a very well regulated fashion.
Speaker 3 (15:31):
So you mentioned the stock connect or an ETF connect
being fully transparent, fully open for international investors. Whether that's
from a product perspective, Hong Kong is the hub of
virtual assets for age specific. We have spot, we have leverage,
we have derivatives. How long do you think it'll take
stock connected ETF connect to be fully opened to allow
(15:55):
crypto ETFs?
Speaker 4 (15:56):
Yeah, you know, when I was walking over here, I
dropped my crystal ball, so it's been completely shattered. So okay,
I don't have an answer to that. But when we're
having these discussions and how we can enhance the Connect
programs is we want to continue to expand the universe
and make more exposures, more securities available, both in mainland
(16:18):
China and also here in Hong Kong.
Speaker 5 (16:20):
So that's the game plan.
Speaker 4 (16:22):
We want to continue to move those conversations forward. But
in terms of when it will happen, no one has
a crystal ball at this point. But we're making the
right movements and having the right discussions. And again, I
think the trajectory of Stock Connect shows that it is
an evolution that is happening here and eventually we'll get there,
but we just don't know exactly when that will be.
Speaker 2 (16:43):
You know, I lost count already because as you point out,
you know, this is a constantly evolving story to Stock Connect.
To be more specific to our listeners and viewers, how
many stocks are part of this universe?
Speaker 4 (16:52):
Like?
Speaker 2 (16:53):
Either way, I'm not sure if they're phrasing the question
properly here. So, yeah, what can mainland investors buy in
Hong Kong. How many what's that investable universe.
Speaker 5 (17:00):
And vice versa.
Speaker 4 (17:02):
If coming southbound they have access to over five hundred
stocks coming here. Going northbound, it's roughly I think it's
over twenty two hundred stocks that are available in the mainland.
So you know when kind of focusing on the sheer
numbers is one thing, but also around the coverage of
market capitalization, right, so you're covering well over eighty percent
(17:24):
of both markets market capitalization. So it's a very broad
program as is, and this has been something that again
we've been striving for to do, and again as the
program has evolved, more and more securities have been included.
Speaker 3 (17:40):
I think if we look at ETF connect for one,
there's more than two hundred ETFs and on the other
one there's maybe seventeen. Indians are looking to add to that,
and I think with the new change that you mentioned
with lowering the threshold and having more international names, that
will definitely help in terms of ETF offering that's available
for investment.
Speaker 2 (17:58):
Well, I'm just curious and I'm not sure sure there's
an answer to this question. Actually, So if I'm an
ETF issuer and obviously my end game is AUM and flow.
How do I raise my hand to be part of
this or like where does that you know, to get
bumped up in the league tables?
Speaker 4 (18:12):
As they say, Yeah, well, I mean for this, we
have a prescribed criteria to be included in ETF connect
and so for that you can have up to forty
percent of your ETF being exposed to international equities.
Speaker 5 (18:26):
There's a minimum AUM threshold.
Speaker 4 (18:29):
Which is about five hundred and fifty million Hong Kong
dollars for southbound for ETFs in Hong Kong to be
eligible up there, and then there's a listing period of time.
Speaker 5 (18:40):
That you need to be available, which is six months.
Speaker 4 (18:42):
So there's a whole set of criteria that ETF issuers.
It's fully transparent that it's out there for them to see,
and once their ETF satisfies that, we do semi annual reviews,
so we will review those products every six months and
if you meet those criteria, you're in.
Speaker 5 (19:00):
And so that's that's how you get in.
Speaker 4 (19:01):
And it's the same way that it works for the
mainland issuers as well.
Speaker 2 (19:05):
Yeah, and in terms of just the bold spectrum of
product offering that we offer global investors in Hong Kong.
Speaker 5 (19:10):
Yeah, what do you think is lacking?
Speaker 2 (19:12):
Where's the gap? So we have everything from everything, you know,
I was talking to Rebecca earlier on. We have a
whole slew of inverse and bears BT you know ets
for example for hedging, we have I don't know, pick
your theme. Where do you see the most growth?
Speaker 4 (19:25):
A few areas that I think we could see some
more growth.
Speaker 5 (19:29):
I do think.
Speaker 4 (19:29):
Thematics and the levered in inverse space. I think there's
always going to be runaway there. I think one thing
with ETF issuers, they're never short of ideas.
Speaker 5 (19:38):
Oh yeah out there.
Speaker 2 (19:40):
Right, so not all It's almost like it's almost like
a party at two am. You ask anyone on any topic.
There there's a there's a there's an et there's an
ETF for that opinion.
Speaker 4 (19:50):
Yeah. Yeah, there's a lot of space out there. And
again I think issuers do a good job about innovating
and bringing out new products and things along those lines.
But again I think thematics and levered and inverts, especially
here in Asia, I think are going to be products
that are going to continue to drive the growth. But
still even just the core asset allocation products whether or
(20:11):
not it's fixed income, some of your global kind of
broader like emerging markets, global equities. Having some of those
products in here as well, I think will be especially
attractive to institutional investors in this region. So one of
the things that I always kind of look at and
I talk to etf issuers, especially in the US and Europe,
is you know, there's not a lot of white space
(20:33):
in those markets, right, but when you come to Asia,
and this isn't just Hong Kong, when you come into
Asia as a whole, there is a lot of I
think open white space for product innovation and that you
can actually realize here Compared to a lot of these
other markets that I think are very very concentrated and
just trying to kind of carve out a niche in Europe,
(20:55):
in the US, I think it's very very difficult, and
that's where you see the flows in the US. It's
it's still very very concentrated. It's going to the top one, two,
three etf issuers into the top five ten products, and
here I think you have the ability to really innovate
and bring out some interesting products and have some clear
white space from a competitive standpoint.
Speaker 1 (21:16):
This podcast is brought to you by HKX Asia's ETF marketplace,
where you can get exposure to themes ranging from AI
to virtual assets, small cap to large cap, Greater China
to global search HKX to learn more.
Speaker 3 (21:33):
So if we switch gears to the Middle East, this
is obviously a huge importance to the Hong Kong and
China market. We've just had two ETF's list in Saudi
Arabia tracking Hong Kong shares raising more than one billion
dollars in assets. Where do you see this market going
and what's the importance on Hong Kong exchange. You've added
the Saudi Exchange as one of your recognized stock exchange
(21:55):
last year. So where do you see the significance of
the Middle East? Houses is going to impact Hong Kong?
What's its potential and is this a game changer in
your opinion?
Speaker 4 (22:04):
Well, I think first the one thing that Hong Kong
and HKUX does really well is we build connections. And
you know when we were talking about this earlier around
Hong Kong kind of punching above its weight class. This
is how we do it right. This has really been
you know, the key ingredient for our successes. Building these connections. Again,
(22:24):
whether or not, it's the connect programs that we've been
talking a lot about, and this here is really a
product connection that we've been building and working through with
Saudi Arabia. You know, late last year CSOP they launched
the world's largest Saudi Arabia ETF here. It's now about
one point two one point three billion US dollars of assets,
so it continues to grow. And now that product has
(22:46):
also been listed in mainland as well through a master
feeder structure. This here is really the next connection for
Hong Kong to continue to connect Asia capital into the
Middle East and then also help Middle East capital connect
here into Asia as well. So there's two ETFs that
you mentioned that were listed, one by Hang Saying, the
(23:07):
other by CSOP with their partners in the Middle East.
And again I think these are just important connections that
these markets are continuing to build. And I think that
is really what HKX and what Hong Kong just continues
to do really really well. It's build these market connections
with all the markets that are out there.
Speaker 5 (23:27):
Interesting.
Speaker 2 (23:28):
I remember I was having a conversation with the CEO
of Money China a few weeks back, and she mentioned
that more than being an exchange, you guys are really
a tech company if you think about it. You know,
the engineering that needs to be in place for the
world to see the fancy stuff.
Speaker 5 (23:44):
Yeah.
Speaker 2 (23:44):
The reason I bring that up is you guys are
almost at the frontier of many of the different business
areas that you're in, So it's almost like you're a
consultant number one when you deal with all your partnerships
in the mainland or across the region Middle East, Southeast Asia.
Speaker 5 (24:00):
Bring that up as well.
Speaker 2 (24:01):
If budget was no issue, if you're unrestrained by policy
on the other side of the table, for example, what
do you think you'd want to put in place, Like
what is that dream project that you think will be
better for everyone else if that was in place? Like
is it a stock connect for all? Is it's let's
bring spy to Hong Kong? You know what's that wish list?
Speaker 4 (24:25):
You know? I guess first to Bonnie's comment, I didn't
hear it, but I do agree. I think exchanges are
technology companies. I mean, yes, you trade securities and different
things along those lines, but at the core of what
we do and the backbone of it all is really
having extremely efficient technology for capital to meet with opportunities.
Speaker 5 (24:46):
So I think that's the first part.
Speaker 4 (24:48):
Now, if there are things out there that you know,
no budget and whatever it is that we need to
bring here in different things along those lines. To me,
I actually don't think it's really a technological innovation and
different things along those lines. Is if I could just
wave a magic wand I would have all the products,
the ETF products you mentioned, SPY, you know, QQQ, you
(25:09):
have all these very well known liquid products. I would
just put them here in the Hong Kong market and
you just have one market here for Asia Pacific for
investors to trade whatever exposures they want. So to me,
that would be the way to do it, you know,
is just have all the products that you can ever imagine,
(25:30):
you just put it in and be this one stop
shop for.
Speaker 5 (25:32):
All the investor needs.
Speaker 4 (25:34):
So to me, that would be what I would kind
of think as what we would want, at least from
my perspective.
Speaker 2 (25:40):
Well, thank goodness. Then the ETF providers are all very
creative thinkers. Here's here's what I think you guys need.
Speaker 5 (25:47):
Yeah, everything, here's here's everything.
Speaker 4 (25:50):
I mean, that's the thing for you know, be in exchange, right,
you're really a marketplace. Right. We provide the marketplace for
issuers to list, race capital, raise assets under management, be
creative in the market. We provide the infrastructure for liquidity
to be provided for investors come in and get those
(26:10):
access you know. So for us, we want to be
this one stop shop for all the kind of the
trading and the clearing, the product and the services needs
for investors here. So that's I think the beauty of
being the marketplace. You just want to have everything here
and let investors, you know, choose what they're interested in.
Speaker 2 (26:28):
And I'm wondering, do you get frustrated sometimes there are
things that are obviously beyond your control. You can build
the platform, you can design it perfectly. And then we
were talking earlier on right like this year has been
in terms of market sentiment has been challenging, and suddenly
things have turned and suddenly there's all this money coming
in and suddenly you're seeing your products run. Yeah, And
(26:51):
I'm wondering, at some point you get frustrated sometimes because
there are things that are simply beyond your control. You know,
that is the nature Well, the market. You can design
that's good a product as you want, but.
Speaker 4 (27:00):
Well, it's the fact of life. I mean, there's always
things that are beyond your control. But I think for
us and at HKX and within equity product development, we
always have to just remain focus on the things that
you can control. And one of the things you cannot
control is market sentiment and things along those lines. Every
market goes through peaks and valleys. Right sentiment is positive,
(27:23):
sentiment turns not so positive, and things along those lines.
But from an exchange standpoint, we always have to be
looking at how do we provide the right infrastructure, how
do we provide that right structure so when things do turn,
investors can capitalize on them. And I think a lot
of the things that we've been doing over the past
(27:44):
call it eighteen twenty four months, has really been improving
a lot of the infrastructure. We've rolled out for more
of the high frequency traders, a self match prevention kind
of trading mechanism. We just closed up the consultation and
the cash equity market to reduce the minimum tick sizes
or the minimum spreads. So hopefully when we roll that
out next year to be able to compress trading spreads
(28:07):
into the market. So there's all these things that we
just continue to do because you just never know when
the market is going to turn and liquidity is just.
Speaker 5 (28:16):
Going to come through.
Speaker 4 (28:16):
I mean we saw that again in late Q three
towards the end of September into Q four, where you
have this massive rush of liquidity and you just always
need to be ready and iterating on that.
Speaker 2 (28:27):
Yeah, I mean people look up to you, guys. You
know this, the things will go unnamed. It was a
conversation I was having years back, and I think it
was it was still I think under Gucco where this
exchange basically said, can you put us in touch with
HCX because they had the best practices when it comes
to XXX, and we were happy to make that connection.
(28:48):
And I think to your point, right, and I'm wondering,
I think your ant did already. The last eighteen months
has been challenging, but that doesn't seem to have deterred
you guys in terms of fixing the roof and fixing
the plumbing, Yeah, fixing the pipe, Yeah, you.
Speaker 5 (29:00):
Have to be doing that at all times.
Speaker 4 (29:02):
Is I do think that HKX sets a global standard
for how exchanges can and should operate in terms of
the infrastructure, the regulations and things along those lines.
Speaker 5 (29:14):
It doesn't mean we're perfect, right.
Speaker 4 (29:15):
I Mean, if we were, then we wouldn't have to
be constantly iterating. But all exchanges, or a lot of
the really good exchanges, are constantly finding ways to improve
their infrastructure, their technology, the overall market structure to make
it easier for investors and people to access liquidity. So yeah,
you just continue day in and day out to improve
(29:36):
and again, don't focus so much on the things you
can't control, which is market sentiment. Focus on the things
that you can, which is our actions and the initiatives
that we can do to make it a better investor
in trading environment.
Speaker 3 (29:48):
So, speaking about fixing exchanges, other exchanges have crashed had problems,
but Hong Kong Exchange hasn't recently. Why do you think
you guys were able to avoid this when other exchanges,
especially in times of volatility or when there's a lot
of trading volume, which we've had recently.
Speaker 4 (30:04):
Look, I'm not going to get into what happened in
other exchanges and diagnose their problems or their challenges or issues,
you know, I think what's core to us is operating
a resilient market, and that is effectively what we do,
and that is at the forefront of it, in making
(30:24):
sure that we have the right infrastructure, the right market
structure in place, the right risk management in place as well,
you know, and how we handle that, how we collateralize
and margin on the derivative side, and things along those lines.
So again, it's an iterative thing. It's been something that
we've been evolving and trying to perfect over the years.
(30:48):
And again that's I think for us, we just we
have a tremendous amount of pride and just operating a
very resilient and vibrant market for ourselves.
Speaker 3 (30:58):
We always get this question, but how how do you
select an ETF ticker on Hong Kong Exchange.
Speaker 4 (31:04):
Well, for anyone, there is a little bit of a process,
you know. I remember back when I was on the
ETF issuer side and we were listening some ETFs on HKX.
I found it to actually be a very interesting process
because you go into a room, you pick out some
ping pong balls that correspond to stock codes that are
(31:25):
available for ets. And so you go in there and
you pick out five ping pong balls, again correspond to
a set of stock codes, and then you get those
five stock codes and you pick them.
Speaker 5 (31:38):
You pick one from there, okay.
Speaker 4 (31:40):
Right at the exchange, we have a predetermined like range
of stock codes for ETFs that are generally starting with
two or three and things along those lines. So the
range is predefined, and that's how we do it. Is
it's through this lottery kind of system. That's the standard way. Now,
the other way you leave it up to face, when
you leave it up to fate, okay, right, and you're
(32:02):
really going to roll the dice and picked out the
ping pong balls and things along those lines. But the
other way to do it is you can make a
charitable contribution to the HKX Foundation and you can make
that charitable contribution and then you get to pick your
stock code from that predetermined range of stock codes. So
there's two different ways to do it. You know, if
you want to leave it up to fate, you can
(32:23):
do that. If you want to make a charitable contribution
and control your destiny and control your fate, you can
do it that way as well.
Speaker 2 (32:29):
So if I've always had my eye on one HK
C K Hutch, if I suddenly woke up the next
morning I wanted a lottery, I had one hundred billion
dollars and I went, Brian, can you take this to
your team? I want one hk Is there a way
that you guys can make that happen.
Speaker 4 (32:48):
Well, I would generally say, you cannot take someone else's
stock code. Okay, that is listed, but you need to
go talk to them, not the that's right, whether or
not they want to tell you them, to them, right,
and say you have one hundred billion dollars and you
want stock code one.
Speaker 3 (33:04):
So an interesting fact is Meta was actually owned by
an ETF Fisher round Hill Ball, and they had that ticker,
and Mark Zuckerberg wanted it, and so they paid I
think it was maybe sixty million was what the rumored
amount was.
Speaker 5 (33:21):
Only I have one hundred billion.
Speaker 3 (33:23):
Get that ticker, and then they that ETF then became
m et V as opposed to m et A.
Speaker 4 (33:30):
Yeah, I mean a one hundred billion dollars, there's a
lot of money. I figure they will, they might, they
might consider it, they'll at.
Speaker 5 (33:36):
Least entertain a conversation, but.
Speaker 2 (33:38):
Then money, I guess, goes to them and not you guys.
Speaker 4 (33:40):
Right, Yeah, No, well it purely because it's there, It's
this is purely theoretical.
Speaker 5 (33:46):
I would assume it would need to go to them.
Speaker 4 (33:48):
But again, we've never had these situations where someone is
I mean generally you're not seeing someone going in and
acquiring someone else's stock.
Speaker 5 (33:56):
Yeah, I've always had my eye.
Speaker 4 (33:57):
You know.
Speaker 2 (33:57):
Another thing that's also come up, and you can chime
in if you if you choose to a friend of
mine in the US said, why are your tickers in
the Asia Pacific? Why are they all numbers? You look
at Japan, you look at Korea. You know. The sad
thing about working in a data company is on day two,
I know what seven hundred HK is. Yeah, I would
know what zero zero five nine three zero k as
(34:18):
that sounds. In electronics, has there ever been a point
where we toured with the idea of going from numbers
to letters at some point.
Speaker 4 (34:25):
Well, you know, I came to Hong Kong over twelve
years ago.
Speaker 5 (34:30):
That was probably.
Speaker 4 (34:32):
I would say one of my biggest challenges was just
keeping all the numbers straight, because you know, in the
US and a lot of the western markets, they use
the alphabet, and it's just it's very kind of intuitive
intuitive that way, at least for me, because that's the
way I've been programmed. But I feel like in Asia,
numbers are very very important here, right the number eight.
(34:52):
I mean, you know, all of these numbers have very
symbolic and sentimental reasons behind it and across the Asian markets,
and to me, that's the reason why we use numbers
over the alphabets out here. So I think it's just
purely as simple as that. But I could be wrong.
You know, I wasn't the one that kind of invented it,
(35:14):
but given that most of the Asian markets are using numbers,
I would probably assume it's because of the symbolic meaning
behind numbers here and how you can pare them up
together and different things along those lines, like the meaning
of two A two eight and all that kind of stuff.
I think, and issuers really kind of look at these numbers,
I know, when we're talking to etf issuers and they're
(35:36):
getting their stock codes and different things along those lines,
and you know, people will ask, do I have to
have this one right because you know it has a
four in it or something along this line. So yeah,
there's I think the meaning behind numbers is very compelling
and meaningful here in Asia compared to the US.
Speaker 2 (35:55):
And you know, ironically enough, your possibilities are literally infinite
when we deal with numbers.
Speaker 4 (36:01):
Here, well, it becomes constrained by how many numbers we
can actually have in a stock code.
Speaker 5 (36:06):
But is there a limit, uh, yeah.
Speaker 4 (36:08):
Generally or is it about in the Hong Kong cases. No,
I mean you can go up to like I think
we can go up to like ninety nine thousand or
something like that. So I mean it's not like infinite infinite,
but like yeah, I mean at the end of the day,
I mean you can always just increase it if we
need it to.
Speaker 3 (36:24):
But yeah, do you have a favorite ticker?
Speaker 2 (36:27):
I love all the ETFs equally, Well one HK my
eyes on.
Speaker 5 (36:34):
You just need a hundred billion? Just I need a
hundred billion.
Speaker 2 (36:37):
Here we go, Brian, it's fantastic. Thank you for spending
the time and being a good sport and bantering with
us here in our latest episode of Tiger Money podcast.
That was Brian Roberts ahead of Equities at HK. It's Rebecca,
thank you.
Speaker 3 (36:50):
For listening to Tiger Money, your Bloomberg podcast about investing
funds and the financial market in Asia and beyond. If
you like what you hear, don't forget to subscribe, like share,
or leave us a we would love to hear from you.
Until next time. You can find us inside the Bloomberg
terminal or LinkedIn. This podcast was produced by Clara Chan
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