Mirae Asset Management’s exchange-traded fund (ETF) provider Global X’s asset management scale (AUM) exceeded US$400 billion in October last year, ranking among the top global peers, and it was the first AUM milestone peak after exceeding US$300 billion in April last year, and as of December 15 last year, the AUM of the bank’s Hong Kong-listed ETFs reached US$2.6 billion, which is more than double the US$1.2 billion at the end of September 2020. Zhong Jun, vice president of sales at Global X ETFs, said in an exclusive interview that even if the United States is expected to enter a rate hike cycle this year, which will have an impact on the overall market, there will still be different thematic sectors to do well, and you can consider investing in thematic ETFs.
Zhong Jun pointed out that according to data from the Hong Kong Stock Exchange, the total number of ETFs listed in Hong Kong was about 148 at the end of October last year, which was only a slight increase compared with the end of October 2020, but the AUM and average daily turnover of ETFs in that month increased by 20% and 70% year-on-year respectively, reflecting the increase in market acceptance of ETFs, and “more people understand the benefits of ETFs”. He added that ETFs are not new in Hong Kong stocks, and Global X hopes that by launching thematic ETFs, investors can discover the difference between thematic ETFs and large-cap ETFs: “Our products are very different from the market-dominating ETFs in the past, and can bring investors relatively large returns.”
As of last week, GX China Tram (2845) and GX China Clean Energy (2809) had market capitalizations of more than US$900 million and US$400 million respectively, the largest among the bank’s ETFs listed in Hong Kong, both of which recorded returns of more than 40% last year, although they both fell by nearly 10% in the first week of this year, but they still outperformed the US stock index and the Hong Kong Hang Seng Index since the beginning of last year (Figure 1).
During the last interest rate hike period in the United States, Hong Kong stocks hit a new high of 33,484 points
Zhong Jun believes that even if the United States is expected to enter a rate hike cycle this year, it is still expected to not detract from the attractiveness of thematic ETFs to investors: “First of all, every interest rate meeting of the Federal Reserve is very open and transparent, and the content of previous meetings and the dates of meetings for the rest of this year are known; Second, the rising inflationary pressure in the United States needs to raise interest rates, which is not known today, the Federal Reserve has already made it clear that the market will not be surprised, at least I am not surprised, and interest rate hikes may not necessarily be detrimental to the stock market, taking the Hong Kong stock market that everyone pays the most attention to as an example, the historical high of the Hang Seng Index is 33,484 points in January 2018, and the United States is raising interest rates from the end of 2015 to the end of 2018, so the historical high of Hong Kong stocks appeared in the US interest rate hike cycle, so why should the authorities feel so panicked before starting the interest rate hike cycle this time, Are you worried about the stock market crash coming again?”
“I don’t mean to say, ‘The United States has entered the interest rate hike cycle this time, Hong Kong stocks will definitely rise’, you can also find some data that Hong Kong stocks have fallen during the US interest rate hike cycle, so monetary policy alone can determine the trend of the market.”
Interest rate hikes are cyclical factors that do not harm structural growth opportunities
“The inflation and interest rate issues that the market is currently concerned about are cyclical, that is, some changes brought about by the economic cycle, which is different from thematic investment, or investing in a theme with ETFs, because these themes can bring structural growth opportunities, and structural growth opportunities and cyclical growth opportunities are two different things, and our GX China Tram and GX China Clean Energy ETFs brought investors ideal returns last year.”
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