Hong Kong ETF Providers Anticipate $300 Million Inflows on First Day
Hong Kong is set to launch its first set of ETFs focused on cryptocurrencies, posing potential competition for popular Bitcoin products in the United States. Harvest Global Investments Ltd., the local unit of China Asset Management, and a partnership between HashKey Capital Ltd. and Bosera Asset Management (International) Co. have listed Bitcoin and Ether ETFs in the city. These issuers are expecting approximately $300 million in combined first-day inflows for the six new Hong Kong spot-crypto ETFs, with a preference for Bitcoin funds.
In the US, spot Bitcoin ETFs from issuers like BlackRock Inc. and Fidelity Investments have amassed a historic $52 billion in assets since their launch in January. Bloomberg Intelligence’s Rebecca Sin estimates that Bitcoin and Ether funds in Hong Kong could accumulate around $1 billion in the next two years. However, Han Tongli, the CEO of Harvest Global, believes this estimate is too conservative.
Han argues that financial products and services in Hong Kong are accepted by investors both in the West and the East, while the US primarily caters to the former. Therefore, the issuers are optimistic about the potential inflows of approximately $300 million on the first day for the six new Hong Kong spot-crypto ETFs, with a preference for Bitcoin funds.
Potential sources for these inflows include Chinese wealth parked in the city, as well as active crypto exchanges and market makers in the Asia Pacific region. Despite crypto trading being banned in mainland China, the new funds fall outside the scope of the program that grants Chinese investors access to some Hong Kong ETFs, raising the possibility of future expansion.
One distinguishing feature of Hong Kong’s ETFs is the adoption of an in-kind subscription and redemption mechanism. This allows for the exchange of underlying assets for fund units and vice versa, unlike the cash redemption model used by US Bitcoin funds. Han believes this in-kind approach enhances the appeal of Hong Kong’s products and could result in the eventual uptake of the ETFs being three times larger than that of the US funds.
However, some caution that expected demand must be adjusted considering Hong Kong’s smaller financial sector. While the city already permits crypto-futures-based ETFs, their total assets of around $164 million are a fraction of the $2.3 billion held by the ProShares Bitcoin Strategy ETF, a derivatives-based product in the US. Despite potential challenges, Hong Kong’s local products are appealing due to easy access, particularly during Asian trading hours.
Bosera Asset Management (International)’s Head of Products, Ethan Li, expressed confidence in the appeal of the Hong Kong ETFs and mentioned the company’s plans to expand its team and digital-asset product pipeline. As digital assets have experienced a significant rebound since the market collapse in 2022, the recent revival has stalled. Bitcoin’s price currently sits at around $63,540, approximately $10,000 below its record high in March.
