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Asia Connect / Treasury & Capital Markets
Hong Kong welcomes first covered call active ETFs
Mirae Asset offerings allow investors to navigate volatility without having to manage downside risks on their own
The Asset 29 Feb 2024

Mirae Asset Global Investments (Hong Kong) Limited has launched the first-ever covered call active exchange-traded funds to be listed in Hong Kong, further broadening the product offerings in the market.

The two new ETF listings – Global X HSI Components Covered Call Active ETF (Stock code: 3419) and Global X HSCEI Components Covered Call Active ETF (Stock code: 3416) – primarily invest in constituent equity securities in the Hang Seng Index and the Hang Seng China Enterprises Index respectively.

“The use of covered calls is an increasingly popular investment strategy as investors look to diversify beyond traditional products, navigate potentially volatile markets and hedge downside risk,” says Brian Roberts, head of equities product development at Hong Kong Exchanges and Clearing (HKEX).

A covered call is a strategy where an investor sells call options on an asset they already own, generating income in the form of a premium. This allows investors to benefit from potential asset appreciation up to the strike price, and during times of volatility, the options premiums can provide downside protection to investors.

“This type of strategy typically requires a level of expertise and involves active trading. However, an ETF that incorporates a covered call strategy can help investors save time, generate passive income, and remove the complexity of managing downside risks on their own,” Roberts explains. “We look forward to welcoming more of these and other ETFs to our markets in the coming months ahead.”

Exchange-traded products (ETPs), including ETFs and leveraged and inverse products, are among the fastest-growing segments in HKEX’s markets, with sustained growth momentum and a diversifying product ecosystem. Average daily turnover in the ETP market reached an all-time high of HK$14 billion (US$1.79 billion) in 2023, up 17% from the previous year.

Last November, Hong Kong welcomed the first Saudi Arabian ETF in Asia-Pacific, which was also the world’s largest Saudi ETF with over HK$8 billion in assets under management.

The inclusion of ETFs in the cross-boundary Stock Connect investment scheme has further boosted the continued resilience of Hong Kong’s ETP market since its introduction in July 2022. Southbound ETFs under Stock Connect accounted for 11% of Hong Kong’s ETF market in 2023.

Simmons & Simmons acted as legal counsel to Mirae Asset in the listing. The law firm also advised the Seoul-based asset manager on the successful listing of 16 other ETFs offered in the form of an open-ended fund company in Hong Kong. 

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