The asset-management unit of Deutsche Bank AG is closing 16 exchange-traded funds (ETFs) in Hong Kong, following BlackRock Inc in delisting ETFs with low demand.
The 16 Deutsche Bank X-trackers ETFs ceased trading on Wednesday, according to a Hong Kong exchange filing.
Most of the funds have assets of less than US$40 million.
The closures highlight the challenge of operating ETFs in markets where investors have yet to be persuaded by their allure.
While the US$4.5 trillion global ETF market is setting new asset records almost every month, Hong Kong is bucking the trend — investors have pulled money from ETFs this year even as equity prices in the former British colony climb to a two-year high.
“Deutsche Bank was one of the early adopters of ETFs in Europe, but Hong Kong is at a slower stage of development and client needs are different here,” said Melody He (和弦), head of ETF and index solutions at CSOP Asset Management Ltd (南方東英資產管理).
“Distributing ETFs is harder in Asia and they may not have seen enough demand,” He said.
Money flowing into US equity ETFs increased by 7.5 percent, or US$177.6 billion, this year, according to data compiled by Bloomberg.
In Hong Kong, assets dwindled by 6.6 percent, or US$2.3 billion, the data show.
Hong Kong’s ETF market is hampered by factors including use of a commission-based fee model, where banks or other distributors receive higher fees for selling active funds rather than ETFs, said Chris Pigott, head of Hong Kong ETF services at Brown Brothers Harriman & Co.
The ETF closures include 10 funds on China’s CSI300 Index covering sectors including banks, healthcare, financials and energy.
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