China Fund News reporter Fang Li and Sun Xiaohui
The Hong Kong market is ushering in a historic moment, and the Bitcoin Spot ETF and Ethereum Spot ETF will make their debut!
The six virtual asset spot currency ETFs approved by the Hong Kong Securities and Futures Commission (SFC) of ChinaAMC Hong Kong, Bosera International and Harvest International were issued for the first time on April 29 and officially listed on the Hong Kong Stock Exchange on April 30. These 6 ETFs show certain differentiation in terms of product fees, trading, issuance, and virtual asset platforms.
Analysts expect that Hong Kong's spot Bitcoin and Ether ETFs are expected to reach $1 billion in AUM in the future, but whether this can be achieved may depend on how quickly infrastructure and ecosystems improve.
The Hong Kong virtual asset spot ETF was launched on April 29
The Hong Kong Securities and Futures Commission recently announced six virtual asset spot ETFs, which ushered in their initial issuance on April 29 and were officially listed on the Hong Kong Stock Exchange on April 30.
Specifically, these 6 products belong to ChinaAMC (Hong Kong), Bosera International and Harvest International, each of which is a Bitcoin spot ETF and an Ether spot ETF. These products operate with the investment objective of closely tracking the performance of Bitcoin/Ether (before fees and expenses) as measured by the performance of the CME CF Bitcoin Index or the Ether Index (Asia Pacific Market Close).
As Bitcoin and Ether are virtual assets, for the avoidance of doubt, these ETF funds invest 100% of their assets in Bitcoin or Ether and will not make other types of investments, nor will they invest in financial derivative instruments for any purpose, and will not engage in securities lending, repurchase or reverse repurchase transactions, nor shall they use any form of leverage, and may retain a small amount of cash for various expenses or redemptions.
In fact, Bitcoin and Ether are both virtual assets. Bitcoin is the first digital currency to use blockchain technology to enable online payment transactions, while Ether is based on blockchain technology that allows smart contracts to run on decentralized applications.
Not only that, but these products are slightly different in terms of fees, issuances, transactions, platforms, etc.
First of all, in terms of management fees, the annual management fee of Harvest Bitcoin and Ether Spot ETF is 0.3% of the net asset value, but it is waived for the first 6 months from the listing date, and the annual management fee of Bosera Bitcoin and Ether Spot ETF is 0.6% of the net asset value, which will be temporarily reduced from the listing date on April 30 until August 2024. This may be the first time in recent years that Hong Kong has waived ETF fees. ChinaAMC Bitcoin and Ether Spot ETFs have an annual management fee of 0.99%.
In terms of issue price, the issue price of Harvest International and ChinaAMC (Hong Kong) is US$1 per share, and the initial issue price of Bosera Bitcoin ETF and Ethereum ETF is basically the same as 1/10,000 and 1/1000 of the tracking index on April 26, 2024, respectively, that is, the converted net value of fund shares corresponds to the price of about 0.0001 bitcoin and 0.001 ether, which means that holding 10,000 shares is about 1 bitcoin and 1,000 shares is about 1 ether.
From the perspective of trading units, Harvest International's Bitcoin/Ether spot ETF has a minimum of 100,000 shares (or multiples thereof) in the primary market and 100 shares in the secondary market, while Bosera Bitcoin spot ETF has 50,000 shares (or multiples thereof) in the primary market and 10 shares in the secondary market, and 100,000 shares (or multiples thereof) in the primary market for Ether ETF and 10 shares in the secondary market.
In addition, compared with the products of Harvest International and Bosera International, ChinaAMC (Hong Kong)'s Bitcoin spot ETF and Ether ETF also set up RMB counters.
Professional analysts believe that in addition to the arrangement of fees, issuance, trading, etc., there may be differences, and the market makers and virtual asset platforms of each ETF are also different. Therefore, investors need to pay attention to the total cost of ownership of each ETF.
Hong Kong crypto spot ETFs are expected to reach $1 billion in AUM
After a decade of discussions, the U.S. Securities and Exchange Commission finally approved the issuance of the world's first spot bitcoin ETF on January 11, 2024, allowing crypto assets such as bitcoin to officially enter the traditional mainstream market.
According to Bloomberg data, only about 3 months after its listing, the US spot bitcoin ETF continued to record huge inflows, with a scale of nearly $58.9 billion.
Huaxia (Hong Kong) believes that in the new economic era, the digital economy created by Web 3.0 is one of the most promising investment opportunities in the future. Cryptocurrencies are the most important, the most concerned, and the most widely invested assets in Web 3.0. Among them, Bitcoin and Ether have become the "top stream" in cryptocurrencies with their respective technical advantages and the pursuit of investors.
"Following the issuance of spot bitcoin ETFs in the United States, the Hong Kong market is about to become the first market in Asia to issue spot bitcoin and ether ETFs, and cryptocurrency ETFs are expected to be recognized by more and more markets in the future. As more and more investors widely participate in the investment of cryptocurrencies, cryptocurrencies such as Bitcoin and Ether may become mainstream assets in the new economic era. Huaxia (Hong Kong) said.
Hong Kong's spot Bitcoin and Ether ETFs are expected to reach $1 billion in AUM, but whether this can be achieved may depend on the speed of infrastructure and ecosystem improvement, said Sin Sujun, chief analyst of Bloomberg Industry Research ETF Asia Pacific.
Sin also said that there is strong demand for ETFs from retail and institutional investors in Hong Kong, with both types of investors showing interest in virtual assets. However, the innovative nature of such products means that the infrastructure of virtual asset ETFs will take time to mature, and HashKey and OSL are the only two such exchanges that have been approved in Hong Kong. Once the ETF ecosystem develops, competition is expected to become more intense, with increased capital flows, more accurate pricing, narrower spreads, increased liquidity, and lower fees.
Mainland investors are not yet eligible to participate in trading
The issuance and listing of Hong Kong spot cryptocurrency ETFs means that investors can hold virtual assets through traditional securities investment accounts, without the need to set up additional virtual asset wallets and trading accounts.
It is understood that the Hong Kong spot cryptocurrency ETF is open to Hong Kong professional and retail investors. For Hong Kong investors, on the basis of basic KYC (real-name authentication), as long as they pass the cryptocurrency knowledge test, they can buy Hong Kong's spot Bitcoin and Ether ETFs, and Hong Kong investors must be professional investors to buy the corresponding ETFs in the United States, with high investment threshold restrictions.
Chinese mainland investors are not currently eligible to participate in trading. According to the joint circular issued by the SFC and the Hong Kong Monetary Authority on 22 December 2023 on virtual asset-related activities of intermediaries, neither existing virtual asset futures ETFs in the Hong Kong market nor future virtual asset spot ETFs can be offered to retail investors in Chinese mainland who are prohibited from selling virtual asset-related products.
Editor: Captain
Review: Chen Mo