The Greater China region continues to witness an increasing interest in ETFs, with investors planning to raise allocations in the $270 billion market.
According to the 4th annual Greater China ETF Investor Survey by Brown Brothers Harriman, more interest is in thematic and fixed income products. The finding notes that about 92% of investors across the region plan to increase their ETF allocations within the next year, representing a 10% increase from 2020.
The report states that about 91% of investors in Mainland China will increase their allocation in thematic ETFs this year, while in Hong Kong, the figure stands at 86% followed by Taiwan’s 74%. This comes after cross-border investing between Hong Kong and mainland China received the green light.
Furthermore, the study attributes the growth of thematic ETFs to the strong performance and widespread media attention of several prominent thematic ETFs.
“Thematic ETFs have been a success story in the region as investors have utilised these products as an access vehicle to gain exposure to megatrends that are driving global economic growth,” said Chris Pigott, senior vice president and head of ETFs, Asia at BBH.
The study notes ESG is a growing investment theme and 92% of investors in Greater China plan to allocate more funds to ESG strategies in 2021. Furthermore, about 53% of investors expect to have at least 11% of their portfolio in ESG ETFs within five years. Across the region, the internet and technology products remain the leading thematic ETF.
Tech and crypto ETFs gain popularity
Following the recent rise in cryptocurrency value, cryptocurrency-related ETFs emerged among the most preferred in mainland China, Hong Kong, and Taiwan.
The report notes that the gains in the sector are leading most people to allocate more money on fintech and crypto ETFs. Under technology, more focus is on areas such as artificial intelligence, robotics, and electric vehicles.
Types of thematic ETFs in Greater China. BBH data.
Additionally, the Mainland is recording interest in global investors, with 86% planning to join the region’s equity and bond markets in 2021. Compared to other regions, in 2021 U.S. and European investors plan to directly invest in Chinese ETF through inbound channels at 36% and 37% respectively.
China global ETF investment outlook. BBH data.
Notably, investors have different measures of selecting an ETF. In mainland China and Taiwan, investors focus on historical performance while in Hong Kong, investors focus on trading volume, the survey found.