Paging all index investors – almost 5 months ago, I had a little blog post that indicated that a new S&P 500 ETF by Vanguard is going to be launched this year. Just this morning, I was pleasantly surprised to read on Asian Investor that Vanguard Hong Kong has indeed launched the S&P 500 ETF today!

Well, what do you know, within a couple of hours I’ve already gotten an email on this exciting development, before I even have time to make a short post. You can also read the official Vanguard Hong Kong release here on their S&P 500 Index ETF (3140).

A number of ETFs have been listed in Hong Kong in recent years, but few have offered access to equity markets beyond China and Hong Kong. Vanguard ETFs™ are designed to give investors the building blocks they need to create low-cost, globally diversified portfolios. Adding 3140 to our existing ETF line-up gives investors access to close to 80% of the world’s equity market value.

A Few Interesting Points

  • Non-China ETFs in Hong Kong suffer from a lack of liquidity.
  • 111 of 152 ETFs invest solely in mainland China.
  • Vanguard ETFs in Hong Kong, while smaller in size, are seeing “interesting pick-ups” and gradual build-up of interest.
  • Liquidity of an ETF should not merely be measured by the trading volume, but rather the liquidity of stocks that make up the S&P 500. (This was an interesting point I’ve recently read about on Vanguard’s HK website on ETF’s deep pool of liquidity)
  • The Hong Kong listing offers Asia-based investors the advantage of trading during Hong Kong market hours, instead of other markets like US or UK.
  • Vanguard ETFs may be included in the Shanghai-Hong Kong Stock Connect that will further increase its trading volume.

Despite the vibrant investment community in Hong Kong, the Asian Investor does point out a few interesting things. To me, this is a necessary baby step. The success of the S&P 500 ETF will no doubt give us greater hope for a global ETF, at least in nearby Hong Kong, some time in the future.

I have no doubt that day will come – it is only a matter of time. Where other ETF providers have failed (Lyxor’s two US ETF delisted in Hong Hong in 2012), Vanguard will succeed. Vanguard’s unique ownership structure – Vanguard is owned by Vanguard funds, which in turn are owned by investors and clients like us – makes all the difference.

More Than Index Investing

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