Hong Kong's capital market ushered in a historic moment with the listing of Asia's first virtual asset spot ETFs.
On April 30, Bosera Bitcoin (03008. HK), Bosera Ethereum Coin (03009. HK), Harvest Bitcoin (03439. HK), Harvest Ether (03179. HK), ChinaAMC Bitcoin (03042. HK), ChinaAMC Ether (03046. HK) is listed on the Hong Kong Stock Exchange, and the above six virtual asset spot ETFs all rose to varying degrees at the beginning of the market.
The reporter learned that the two types of virtual asset spot ETFs issued by Hong Kong this time allow both cash (in-cash) or physical (in-kind) redemption, which are only open to Hong Kong professional and retail investors, and Chinese mainland investors are not currently allowed to participate in trading. The six ETFs also differ in terms of product fees, trading, issuance, and virtual asset platforms. Among them, the annual management fee of Harvest Bitcoin and Ether Spot ETF is 0.3% of the net asset value, the annual management fee of Bosera Bitcoin and Ether Spot ETF is 0.6% of the net asset value, and the annual management fee of ChinaAMC Bitcoin and Ether Spot ETF is 0.99%.
Some analysts predict that the AUM of Hong Kong's spot Bitcoin and Ether ETFs is expected to reach US$1 billion, which will further consolidate Hong Kong's leading edge in the field of fintech and digital assets. The interviewed senior industry experts also reminded investors that it is important to treat virtual asset spot ETFs as high-risk investment varieties, reasonably set take-profit and stop-loss targets, and reasonably evaluate benefits and costs.
Virtual asset spot ETF listing
On April 30, Hong Kong's first batch of Bitcoin and Ether spot ETFs were officially listed on the Hong Kong Stock Exchange, which is the first batch of virtual asset spot ETFs listed in Asia, and the Ether spot ETF is also the first batch in the world. The issuers include ChinaAMC Asset Management (Hong Kong) Limited ("ChinaAMC Hong Kong"), Bosera Fund (International) Limited ("Bosera International") and Harvest International Asset Management Limited ("Harvest International"), and the virtual asset ETF is managed by two licensed exchanges, OSL and HashKey. In addition, in order to ensure that there are enough fund units in the market for trading, brokers such as Victory Securities (which supports physical delivery) and Eddid Securities act as participating brokers.
The reporter learned that the U.S. Securities and Exchange Commission (SEC) approved the listing of the first batch of 11 Bitcoin spot ETFs in January 2024. Unlike the US Bitcoin spot ETF, the two types of virtual asset spot ETFs issued by Hong Kong this time allow both cash or physical redemption methods, which are open to Hong Kong professional and retail investors, and Chinese mainland investors are not currently able to participate in trading.
Specifically, Harvest International, Bosera International, and ChinaAMC Hong Kong's Bitcoin Spot ETF and Ether Spot ETF have all set up USD and HKD counters, and ChinaAMC Hong Kong's Bitcoin Spot ETF and Ether Spot ETF have also set up RMB counters. These products are invested in the performance of the CME CF Bitcoin Index or the Ether Index (before fees and expenses) as measured by the performance of the CME CF Bitcoin Index or the Ether Index (Asia Pacific Closing Price) in line with the performance of BTC/ETH.
It is important to note that these ETF funds invest 100% of their assets in Bitcoin or Ether and do not make other types of investments, nor do they invest in financial derivative instruments for any purpose, and engage in securities lending, repurchase or reverse repurchase transactions, nor are they allowed to use any form of leverage, and may retain a small amount of cash for various expenses or redemptions.
In addition, these products also differ in terms of fees, issuances, transactions, platforms, etc. 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 waived from the listing date on April 30 until August 2024. 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's products is US$1, and the initial issue price of Bosera Bitcoin ETF and Ethereum ETF is basically the same as 1/10,000 and 1/1,000 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 equivalent to about 1 bitcoin and 1,000 shares is equivalent to about 1 ether.
From the perspective of trading units, the primary market application of Harvest International's Bitcoin/Ether spot ETF is a minimum of 100,000 shares (or multiples thereof), and the minimum trading unit in the secondary market is 100 shares, while the primary market application of Bosera Bitcoin spot ETF is 50,000 shares (or multiples), the minimum trading unit in the secondary market is 10 shares, and the application of Ether ETF in the primary market is 100,000 shares (or multiples thereof), and the minimum trading unit in the secondary market is also 10 shares.
According to the data of the Hong Kong Stock Exchange, as of the close of trading on April 30, Bosera Bitcoin ETF, Harvest Bitcoin ETF and ChinaAMC Bitcoin ETF rose 1.80%, 1.57% and 1.53% respectively, with a turnover of about HK $12.45 million, HK $17.89 million and HK $37.17 million respectively.
Bosera Ether ETF, Harvest Ether ETF and ChinaAMC Ether ETF fell by 0.45%, 0.73% and 0.77% respectively, with a turnover of about HK$2.49 million, HK$4.96 million and HK$12.66 million respectively.
Influence geometry?
What is the impact of the listing of Asia's first batch of virtual asset spot ETFs on Hong Kong?
"Today's new listing of virtual asset spot ETFs will enrich HKEX's diverse and vibrant ETF ecosystem and provide investors with exposure to new asset classes. Following the successful launch of a virtual asset futures ETF a year ago, the first batch of virtual asset spot ETFs in Asia will further enhance the variety and liquidity of HKEX-traded products. ”
Yu Jianing, executive director of the Metaverse Industry Committee of the China Mobile Communications Federation, told reporters that the issuance of Bitcoin and Ether spot ETFs in Hong Kong has a significant systemic impact and will profoundly change the ecological pattern of the global virtual asset market from multiple levels. From the perspective of investors, as an international financial centre, Hong Kong will play a key role in enhancing the regulatory order and transparency of virtual asset investment; from the perspective of trading, Hong Kong is one of the most active ETF trading markets in the world, and the launch of virtual asset ETFs will greatly enhance the liquidity and trading efficiency of the virtual asset market; from the perspective of industries, Hong Kong has always been a pioneer in financial innovation, and virtual asset ETFs will also provide important lessons for other financial centers around the world.
Jensberg, Head of Risk Advisory, Hong Kong, KPMG China, believes that the approval of the Bitcoin spot ETF and the world's first batch of Ether spot ETFs to be listed in Hong Kong not only reflects the rapid response of Hong Kong's regulators and industry to the market demand for innovative products, but also demonstrates Hong Kong's commitment to leading the world in virtual asset innovation and regulation, as well as Hong Kong's determination to become a virtual asset hub.
"Hong Kong spot Bitcoin and Ether ETFs are expected to reach $1 billion in AUM, but achieving this will likely depend on how quickly infrastructure and ecosystems improve. Sin Sukwan, chief analyst of Bloomberg Industry Research ETF Asia Pacific, predicts strong demand for retail and institutional ETFs 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 approved virtual asset trading platforms 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.
Yu Jianing pointed out that even with ETF products as intermediaries, the nature of virtual asset investment still has high risks. The price of virtual assets reflects the supply and demand of the market and is susceptible to sharp fluctuations due to speculation. In addition, factors such as regulatory policies and technological advances may also bring significant uncertainties. Therefore, investors must regard virtual asset ETFs as high-risk investment varieties, and need to fully understand the product features and operating mechanisms, and reasonably set take-profit and stop-loss targets.
"Especially with the frequent emergence of various favorable policies and industries, the short-term market is overheated, and the leverage ratio has risen significantly, resulting in a significant increase in the risk appetite of some investors. As an investor, you should always remain rational and objective, fully evaluate the market environment, investment preferences, risk control, etc., and do not blindly follow the trend. Zhao Wei, a senior researcher at the OKX Research Institute, told reporters.
In addition, the transaction fees of spot ETFs may be higher than those of traditional ETFs, and investors should also reasonably evaluate the benefits and costs. Yu Jianing suggested that investors should not pin all their expectations on a single investment vehicle, but should adopt a diversified investment strategy, take virtual asset ETFs as part of their investment portfolios, and reasonably allocate virtual assets and traditional assets within the risk tolerance range, in order to obtain a better return and risk balance.
Reporter: Yu Jichao