BMO said to exit Hong Kong’s ETF market

September 23, 2020.

Canada’s Global Asset Management is reportedly the latest global firm to pull out of the Hong Kong exchange-traded funds market with plans to sell its seven locally listed funds to China Asset Management (Hong Kong), just weeks after revealed it was leaving the market.

BMO signed a deal to sell the ETFs, which amount to HKD 2.84 billion ($366 million) in total assets, to China AMC for an undisclosed sum, after struggling to raise enough assets in any of its ETF strategies, the Financial Times’ Ignites Asia reported on Wednesday, citing people with knowledge of the matter.

The company’s biggest Hong Kong-listed ETF, the BMO Asia USD Investment Grade Bond ETF, had assets of HKD 1.7 billion ($219.4 million) as of Sept. 22, while its smallest ETF, the BMO Asia Pacific Real Estate ETF, had HKD 8.2 million ($1.1 million), according to its website.

Canadian fund manager Mackenzie Investments, which is a major shareholder in China AMC, will become a sub-adviser for the ETFs, Asia Asset Management previously reported, citing a person familiar with the matter. The move is a more cost-efficient way for the bank to exit the Hong Kong market, compared to delisting, which requires a lot of transaction costs, AAM reported. 

BMO and China AMC did not immediately respond to requests for comment Wednesday. 

In November 2014, BMO became the first Canadian bank to launch an ETF in Hong Kong, with the listing of three products, the BMO Asia High Dividend ETF, BMO Asia USD Investment Grade Bond ETF and BMO Hong Kong Banks ETF. Two years later, it launched four other ETFs.  

BMO’s departure mirrors Vanguard’s decision in August to exit the Hong Kong ETF market, where the U.S.-based asset management firm runs six ETFs that trade on the Hong Kong stock exchange. 

Vanguard, which launched its first ETF in Hong Kong in 2013, pulled in around HKD 3.35 billion ($432 million) in assets across its six ETFs as of August. The biggest ETF, the Vanguard S&P 500 index ETF, accounted for around half of the total assets, according to its website. 

Last month, Vanguard said it would not only exit the ETF market, but also pull out of its Mandatory Provident Fund and Index-Tracking Collective Investment Scheme platforms. The process is expected to take six to 24 months to carry out, as the company moves its Asian headquarters to mainland China.