Surge in Assets Tracking ICE Indices in Asia
Magnus Cattan, head of ICE fixed income & data services, Asia Pacific, said thematic offerings listed on Asian exchanges using ICE indices as benchmarks have nearly quadrupled since 2018 with the bulk of growth coming in the last 12 months.
Cattan told Markets Media that ICE had $17.1bn in assets under management for exchange-traded funds listed on Asian exchanges tracking ICE’s indices at the end of 2021 with $3.26bn in thematic environmental, social and governance or climate ETFs.
He continued that FANG+, which tracks highly-traded growth US stocks of next generation technology and tech-enabled companies, was initially the primary index that firms or clients in Asia were interested in discussing with ICE. In 2020 there was approximately $850m in assets under management in 12 Asian ETFs tracking FANG+ and one ETF tracking a 5G themed index.
“In 2021 there were 12 new thematic ESG or climate ETFs tracking our indices which took assets under management at the end of the year for all 24 products to $3.26bn,” Cattan added. “The bulk of that growth has come in the last 12 months.”
Cattan continued that interesting themes that ICE is working on with clients are electric vehicles, semiconductors and 5G.
“CTBC Investments listed a battery and energy storage technology ETF which tracks one of our indices,” he said. “There is also often an ESG tilt which is primarily driven by demand from retail customers.”
The Taiwanese asset manager selected the ICE FactSet Battery and Energy Storage Technology Index for its ETF which listed on the Taiwan Stock Exchange on January 25 2022 and became the first battery and energy storage technology thematic ETF listed in the country. In November 2020 ICE and CTBC had announced a collaboration to develop ESG indices and financial products for Taiwanese market participants.
ICE faces competition from other index providers and exchanges in Asia Pacific. Cattan said: “At ICE we consider ourselves to be a data and technology organisation. Data plays a role in our indices and our ability to cover all asset classes from fixed income, commodities to equities is a strong advantage, as well as the ability to bring together the broader ICE organisation.”
For example, when working with Samsung Asset Management in Korea around their carbon credit ETF, ICE could bring its futures team into those discussions to help them understand how to trade those contracts and manage risk.
Cattan expects the growth in carbon contracts to continue and said several markets are looking to list similar products to Korea.
In addition, Japan is one of the more mature ETF markets in Asia Pacific, which he said could see interesting growth, and the Taiwanese ETF industry has picked up significantly in the last five year
“Hong Kong, for example, has reached an agreement to add ETFs to Stock Connect to give access to mainland Chinese investors so we think that market is going to be far more international,” he added. “Fubon Fund Management has listed the first semiconductor ETF in Hong Kong and it tracks one of our indices.”
In December 2021 Hong Kong Exchanges and Clearing Limited announced it had reached an agreement with Shanghai Stock Exchange, Shenzhen Stock Exchange and China Securities Depository and Clearing Corporation on the arrangements for including eligible ETFs in Stock Connect. HKEX estimated that the preparation work will take approximately six months to complete.
Stock Connect gave investors in mainland China and Hong Kong markets direct access to each other’s stock markets for the first time. Hong Kong-Shanghai Stock Connect was launched in November 2014 while Hong Kong-Shenzhen Stock Connect followed two years late in December 2016.
Cattan continued that there is certainly demand in Asia for crypto ETFs.
“Australia is likely to have them in the not too distant future and other markets are looking at digital assets,” he added.