Senior staff of French banking and investment group Societe General (SG) are upbeat about the growth prospects of the ETF market in Asia, as they launched its ETF platform on the Hong Kong Exchanges and Clearing (HKEx) yesterday.

HKEx chief executive Paul Chow speaking during the listing ceremony.

Mr Bernard Desforges, head of equities and derivatives, Asia Pacific, SG Securities (HK), said: "In my view, Asian investors have a bigger appetite for risks. While Asians like equities, Europeans generally prefer fixed income investments. That's why I would say that the Asia Pacific has more potential than Europe for ETFs."

Currently, the company is the ETF market leader in Europe, with over 70 ETFs listed, 19 billion Euros of assets under managment and a 26% market share at the end of March this year.

Mr Desforges expressed confidence that the Asia Pacific region could achieve this and more with time. He added that the company was looking at having 50 to 60 ETFs in the region in two to three years' time.

In line with this, Lyxor Asset Management, a wholly-owned subsidiary of SG, launched six Exchange Traded Funds (ETFs) in Hong Kong yesterday. Two funds started trading the same day while the remaining four will be listed on Apr 26.

Mr Paul Chow, HKEx chief executive, welcomed the addition of the Lyxor ETFs. In his speech at the listing ceremony, he said: "ETFs have experienced a steady growth in Hong Kong since the listing of the Tracker Fund in 1999.

"We now have nine listed ETFs with a turnover value of over HK$500 million a day in the first quarter of 2007 and this turnover is the highest in Asia Pacific ex-Japan."

The trading floor of the Hong Kong Exchanges and Clearing.

Agreeing with the positive sentiment, Ms Sandra Lee, managing director and head of retail, marketing and product development at SG, said: "Lyxor ETF is investment made easy as it combines the benefits of diversification, transparency, intraday liquidity and cost efficiency.

"These unique qualities are particularly appealing to Asian institutional and individual investors looking for cost-efficient strategic asset allocation or tactical allocation based on cyclical opportunities."

Prior to this, Lyxor has launched six ETFs at the Singapore Exchange (SGX), bringing the total to 12 of such funds currently traded in Singapore.

Worldwide, 136 ETFs were launched in the first six months of 2006, compared to 119 for the whole of 2005.

About ETFs

Exchange Traded Funds or ETFs are financial products like unit trusts and investment-linked products (ILPs).

Simply put, ETFs track an index. It can be a market index (such as the STI ETF tracking the Straits Times Index) or commodities (such as Lyxor ETF Commodities CRB tracking the Reuters/Jefferies Commodity Research Bureau Index) or even bonds (such as ABF Singapore Bond Index Fund tracking the iBoxx ABF Singapore Bond Index).

If the index goes up, then the fund tracking it will rise by the same amount. However, there may be some difference between the index and the ETF at a point in time, but the fund and its index should have a high correlation and very low tracking error over a period of time.

Generally, those who like ETFs point to its lower costs and ease of trade. ETFs are traded like stocks on the exchange and they cost less than unit trusts and ILPs because there is no sales charge, just management and brokerage fees. Also, trading lot can be as small as 10 units.

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