Questions relating to the 3 ETFs managed by Hang Seng Investment Management Limited (i.e. HSI ETF, HS H-Share ETF and HS FXI25 ETF) ("Hang Seng's ETF(s)")
ETF stands for exchange traded fund.
An ETF is an open-ended fund that can be traded like a share on a stock exchange. An index-tracking ETF is a listed collective investment scheme that aims to track the performance of the underlying index by holding a portfolio of the constituent stocks of that index. ETFs have been issued in many countries/territories, such as the United States, Canada, Japan, Singapore and Hong Kong.
Most ETFs are designed to match as closely as practicable the performance of the underlying index.
Tracking is usually achieved by using full replication or representative sampling strategies.
Using a full replication strategy means that an ETF will invest in the constituent stocks of the underlying index in substantially the same weightings as these stocks have in the index, and hence, the performance of the ETF will match, as closely as practicable, the performance of that index.
An ETF adopting a representative sampling strategy holds a sample of stocks that have similar features such as market capitalisation, industry weights and liquidity to the underlying index. ETFs that use this strategy tend to have a higher risk of tracking error than those using a replication strategy.
Most ETFs are passively managed by fund managers who will invest in the constituent stocks of the underlying index according to their respective weightings in the underlying index.
When a constituent stock or its weighting in the underlying index changes, fund managers are responsible for implementing the necessary adjustments to the ETF's portfolio of stocks to ensure that the composition and weightings of the stocks held by the ETF closely corresponds to those of the underlying index.
ETF units are traded on the stock exchange (i.e. the secondary market), while the creation and redemption of ETF units can usually only be made through participating dealers (i.e. the primary market), but these kind of transactions are normally made in large and pre-defined blocks of units. New units of an ETF are created when participating dealers deliver a creation basket of constituent stocks of the underlying index and a cash component (for rounding adjustment, accrued dividend etc.) to the fund manager of the ETF. On the other hand, on redemption of ETF units, participating dealers can obtain from the ETF the constituent stocks of the underlying index and a cash component when they present a prescribed number of ETF units to the fund manager of the ETF.
The market price per ETF unit is largely based on its net asset value ("NAV") per unit. However, as ETF units are traded on the stock exchange, their market prices may, due to the forces of supply and demand, diverge from their NAV per unit. With the presence of the creation and redemption mechanism, such divergence should be minimal under normal situations.
An ETF represents an investment portfolio, which provides diversification across different shares through a single investment.
Some ETFs invest in a pool of overseas securities, offering investors exposure to a foreign market.
ETF units are traded like shares listed on a stock exchange, and are tradable anytime during the trading hours of the stock exchange. Moreover, market makers may be designated to promote the liquidity of ETF units.
LOWER TRANSACTION COSTS/div>
Generally, ETFs have lower transaction costs than traditional open-ended investment funds. The transaction costs of trading an ETF are similar to those of trading stocks, including brokerage and other relevant fees and expenses payable for dealing on the stock exchange.
HIGH TRANSPARENCY REGARDING INFORMATION DISSEMINATION
Since ETFs are exchange-listed instruments, they have to comply with the information disclosure requirements of the relevant stock exchanges. The level of the index and the constituent stocks which make up the index are publicly available information that investors can easily access. Price quotations of ETF units for potential buyers and sellers are disseminated continuously during exchange trading hours.
LOWER INVESTMENT AMOUNT
The amount required for investment in one board lot of ETF units is generally lower than the amount of minimum investment required for a traditional open-ended investment fund.
1. Trading
Investors who have a view on the general direction of a stock market and at the same time want to reduce risk of concentration on any particular stock can choose to trade ETFs. If they are optimistic about the market, they can buy ETF units. In contrast, they can, subject to applicable laws, rules and regulations short sell ETF units in case they have a pessimistic view about the market provided they have already made an agreed arrangement with their brokers.
2. Hedging
ETF can be used as a hedging instrument. If investors hold a portfolio of stocks and they want to hedge against the risk of a market downturn, they can, subject to applicable laws, rules and regulations, short sell ETF units to hedge the risks posed by falling prices of that portfolio of stocks in case of market downturn.
3. Arbitrage
Sophisticated investors can take advantage of the arbitrage opportunities posed by the differentiation in market prices among the ETF units, constituent stocks of the underlying index and related derivatives contract (if available).
How can I invest in an ETF?
In Secondary Market
You can invest in an ETF by simply opening an account with an authorised stock broker and invest in an ETF just like purchasing and holding listed securities.
In Primary Market
If you intend to invest a substantial amount in an ETF, you may contact one of the ETF's Participating Dealers (PD). The PD can help you to create ETF units through an "In-kind Creation" arrangement with the ETF's fund manager, with applicable transaction fees and brokerage commission agreed upon between you and the PD.
Will ETFs pay dividends to investors?
It depends on the dividend distribution policy of the relevant ETF. Generally speaking, most ETFs pay dividends on a regular basis to investors.
What are the risks of investing in ETFs?
The risks of investing in ETFs include but are not limited to the following points:
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To the extent that the underlying index concentrates in the securities of a particular industry or group of industries, the performance of ETFs could be more volatile than the performance of less concentrated funds. |
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Like other index-tracking funds, an ETF is not actively managed meaning the fund manager does not have the discretion to select stocks individually or to take defensive positions in declining markets. Hence, any fall in the underlying index will result in a corresponding fall in the value of the ETF. |
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On the other hand, no assurance can be given that the performance of an ETF will be identical to the performance of the underlying index due to many factors. |
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Although ETF units will be listed on a stock exchange, there can be no assurance that active trading in the ETF units can be maintained. |
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The market price of per ETF unit could be higher or lower than its NAV per unit due to market demand and supply, liquidity and scale of trading spread in the secondary market and will fluctuate during the trading day. |
In general, you should consider if investment in ETFs is a suitable investment for you in terms of your financial situation, investment experience and investment objectives. You should read the offering documents of the relevant ETF (including the full text of the risk factors stated therein) in detail before making any investment decision. You should note that investment involves risks (including the possibility of loss of the capital invested), prices of ETF units may go up as well as down and past performance information presented is not indicative of future performance. In addition, you should avoid excessive investment in any single type of investment (in terms of its proportion of your overall investment portfolio) including any proposed investment in the relevant ETF so as to avoid your investment portfolio being over-exposed to any particular investment risk.
Questions relating to the 3 ETFs managed by Hang Seng Investment Management Limited (i.e. HSI ETF, HS H-Share ETF and HS FXI25 ETF) ("Hang Seng's ETF(s)")
How can I buy or sell Units in Hang Seng's ETF(s)?
You can buy or sell Units in Hang Seng's ETF(s) through your broker or bank securities account anytime during trading hours of the Stock Exchange of Hong Kong Limited (the "SEHK"). The stock code of HS FXI25 ETF is 2838 with 100 Units per board lot, that of HSI ETF is 2833 with 100 Units per board lot, and that of HS H-Share ETF is 2828 with 200 Units per board lot. The transaction costs in respect of dealing in Units in Hang Seng's ETF(s) are listed below for reference. Please refer to the
Hong Kong Offering Document of the individual ETF for details.
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| Brokerage |
Approx. 0.2% - 0.4% (varies from broker to broker) |
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| SFC Transaction Levies |
0.004% |
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| SFC Investor Compensation Levy |
Suspended |
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| SEHK Trading Fee |
0.005% |
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| Stamp Duty |
Approximate 0.1% |
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| Purchase Order Handling Fee |
(Varies from broker to broker) |
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How are the market prices of Units in Hang Seng's ETF(s) determined?
It is expected that the market price per Unit in Hang Seng's ETF(s) will normally approximate its net asset value (NAV) per Unit. However, due to the forces of market supply and demand, market price per Unit in Hang Seng's ETF(s) may differ from the NAV per Unit of the relevant Hang Seng's ETF, which is calculated by adding the market value of stocks it holds, cash, and other assets of the relevant Hang Seng's ETF, subtracting its liabilities, and dividing the result by the number of Units outstanding.
What are the risks of investing in Hang Seng's ETF(s)?
Before deciding whether or not to invest in a Hang Seng's ETF, you should consider if investment in Hang Seng's ETF(s) is a suitable investment for you in terms of your financial situation, investment experience and investment objectives. You should read the offering documents of the relevant Hang Seng's ETF (including the full text of the risk factors stated therein) in detail before making any investment decision. You should note that investment involves risks (including the possibility of loss of the capital invested), prices of Units in the Hang Seng's ETF(s) may go up as well as down and past performance information presented is not indicative of future performance. In addition, you should avoid excessive investment in any single type of investment (in terms of its proportion of your overall investment portfolio) including any proposed investment in the relevant Hang Seng's ETF so as to avoid your investment portfolio being over-exposed to any particular investment risk. Generally speaking, such risks include but are not limited to:
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To the extent that the index tracked by the relevant Hang Seng's ETF concentrates in the securities of a particular industry or group of industries, the Manager may similarly concentrate that Hang Seng's ETF's investment. That Hang Seng's ETF's performance could be heavily affected by the performance of that industry or group of industries. |
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Like other index-tracking funds, each Hang Seng's ETF is passively managed. The Manager does not have the discretion to select stocks individually or to take defensive positions in declining market. Hence, any fall in the relevant Index will result in a corresponding fall in the value of the relevant Hang Seng's ETF. |
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No assurance can be given that the performance of a Hang Seng's ETF will be identical to the performance of the relevant Index. |
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Although Units in each Hang Seng's ETF are listed on the SEHK, there can be no assurance that active trading in such Units can be maintained. |
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The market price of a Hang Seng's ETF Unit could be higher or lower than its Net Asset Value ("NAV") per Unit due to market demand and supply, liquidity and scale of trading spread in the secondary market and will fluctuate during the trading day. |
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Although Units in each Hang Seng's ETF are listed on the SEHK, such Units may be delisted from the SEHK. In such circumstances, the Manager may, in consultation with the Trustee, seek the relevant regulator's prior approval to operate the relevant Hang Seng's ETF as a traditional index fund and will notify the investors accordingly. Alternatively, the Manager may liquidate the relevant Hang Seng's ETF if the Trustee deems it to be in the best interests of investors and will notify the investors accordingly. Investors would then receive NAV per Unit (which may be higher or lower than the amount (per Unit) paid by the investors at the time of original investment) as of the date of liquidation as a result of the Manager having to liquidate all of that Hang Seng's ETF 's investments. |
In relation to the HSI ETF, HS H-Share ETF and the HS FXI25 ETF, investors should note that in tracking the relevant Indexes, these three Hang Seng's ETFs will be investing in the constituent stocks of the relevant Indexes with reference to their respective weightings in those Indexes. Certain constituent stocks of the relevant Indexes are shares of PRC companies which have substantial business exposure to growth opportunities in the PRC. Thus, investors in such Hang Seng's ETFs are subject to the risks of investing in emerging markets generally and in particular, all risks specific to investments associated with the PRC market.
What are the fees, charges and expenses involved in investing in Hang Seng's ETF(s)?
Investors trading via the SEHK will have to pay transaction costs as set out in the section "
How can I buy or sell Units in Hang Seng's ETF(s)?". Currently, all Hang Seng ETFs will pay management fee and trustee fee to the Manager and the Trustee respectively. Investors should refer to the
Hong Kong Offering Document of the relevant Hang Seng's ETF for full details of the relevant fees, charges and expenses. Investors should also note that fee may change and they should check for, from time to time, the information with respect to the relevant Hang Seng's ETF (including any change in fees) at the
Notice to Unitholders section of this web site.
What strategy does the Manager apply in achieving the investment objective of the HSI ETF?
The Manager primarily adopts a replication strategy to achieve the investment objective of the HSI ETF. When there is a change in the constituent stock(s) of the Hang Seng Index or their weightings in it, the Manager will be responsible for implementing any adjustment to the ETF's portfolio of stocks to ensure that the composition and weighting of Index Shares held by the HSI ETF closely correspond to that of the Hang Seng Index's constituent stocks.
What strategy does the Manager apply in achieving the investment objective of the HS H-Share ETF?
The Manager primarily adopts a replication strategy to achieve the investment objective of the HS H-Share ETF. When there is a change in the constituent stock(s) of the H-Share Index or their weightings in it, the Manager will be responsible for implementing any adjustment to the ETF's portfolio of stocks to ensure that the composition and weighting of Index Shares held by the HS H-Share ETF closely correspond to that of the H-Share Index's constituent stocks.
What strategy does the Manager apply in achieving the investment objective of the HS FXI25 ETF?
The Manager primarily adopts a replication strategy to achieve the investment objective of the HS FXI25 ETF. When there is a change in the constituent stock(s) of the FTSE/Xinhua China25 Index or their weightings in it, the Manager will be responsible for implementing any adjustment to the ETF's portfolio of stocks to ensure that the composition and weighting of Index Shares held by the HS FXI25 ETF closely correspond to that of the FTSE/Xinhua China25 Index's constituent stocks.
Can I redeem my HSI ETF Units for Hang Seng Index's constituent stocks?
You will only be able to redeem your Units in return for Hang Seng Index's constituent stocks if you hold a minimum of 50,000 Units. Such in-kind redemption can be dealt with through
Participating Dealers. For details, please refer to the
Hong Kong Offering Document of HSI ETF.
Can I redeem my HS H-Share ETF Units for H-Share Index's constituent stocks?
You will only be able to redeem your Units in return for H-Share Index's constituent stocks if you hold a minimum of 100,000 Units. Such in-kind redemption can be dealt with through
Participating Dealers. For details, please refer to the
Hong Kong Offering Document of HS H-Share ETF.
Can I redeem my HS FXI25 ETF Units for FTSE/Xinhua China 25 Index's constituent stocks?
You will only be able to redeem your Units in return for FTSE/Xinhua China 25 Index's constituent stocks if you hold a minimum of 50,000 Units. Such in-kind redemption can be dealt with through
Participating
Dealers. For details, please refer to the
Hong
Kong Offering Document of HS FXI25 ETF.
How can I obtain market and trading information and other information about Hang Seng's ETFs and the related Indexes?
Real-time trading information of Hang Seng's ETFs will be available on the teletext screen of SEHK. Real-time updates about the related Indexes can be obtained through Reuters, Bloomberg, Moneyline Telerate and on
www.hsi.com.hk and www.ftsexinhua.com (as the case may be). Investors are advised to actively check the information on the relevant Hang Seng's ETF on a regular basis at this web site since information may materially impact on their investment holdings. The Manager may not issue any separate notice or newspaper notice regarding changes of the relevant Hang Seng's ETF.
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Certain information contained in this webpage is obtained and prepared from sources which Hang Seng Investment Management Limited reasonably believes to be reliable and the views and opinions provided herein are given in good faith. Where the information related to investment funds is sourced externally (as disclosed), Hang Seng Investment Management Limited has reasonable belief that such information is accurate, complete and up-to-date. |
The information, views and opinions contained in this webpage is for reference under general situations only, and should not be considered as professional advice or a solicitation to invest in any of the investments mentioned herein.
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Investors should note that investment involves risks (including the possibility of loss of the capital invested), prices of fund units and stocks may go up as well as down and past performance information presented is not indicative of future performance. Investors should read the relevant fund's offering documents (including the full text of the risk factors stated therein) in detail before making any investment decision. |
The fund(s) mentioned above has been authorized by the Securities and Futures Commission in Hong Kong (the "SFC") but such authorization does not imply official recommendation. |
This webpage has not been reviewed by the SFC. |
