HSBC adds trio of physical ETFs to GEMs range

HSBC is launching three emerging market exchange traded funds, focusing on Hong Kong, global emerging Europe and global emerging markets.

HSBC head of ETFs Farley Thomas says the Hong Kong ETF will be based on the Hang Seng index.

He says all three will be physical ETFs rather than swap-based. Thomas says: “There will be regulatory action at some point on swap-based ETFs. You can track most markets physically and trading in this simple way has real value.

“HSBC has a good insight into how emerging markets work and investors expect us to have a good line-up.”

HSBC is also considering launching an India ETF but Thomas says it is more complicated to create a physical ETF for the country as it is problematic because of tax issues.

Earlier this month, HSBC launched a European ETF to physically track the Russian stockmarket. It will rival the iShares swap-based Russia ETF.

HSBC’s Russia ETF, with a total expense ratio of 0.60 per cent, aims to replicate the performance of the MSCI Russia Capped Total Return Net index.  Best invest senior adviser Adrian Lowcock says:

“There is the assumption that swap-based ETFs are risky but just because an ETF is physically backed does not mean it is not risky. Asset managers can do stock lending with physically-backed ETFs, where the collateral is not the same as what it is tracking.”

Skerritt Consultants head of investments Andrew Merricks says: “ETFs can be good to access single markets and they are useful if they are in the right hands.

“HSBC is a big global bank and so its ETFs give investors a sense of security. The bank is well known in emerging markets and has a physical presence there, too.”