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Quick Take Hong Kong ETFs

Hong Kong has recently approved Bitcoin and Ethereum ETFs, following in the footsteps of the US, where BTC funds have been incredibly successful.

However, senior Bloomberg ETF analyst Eric Balchunas believes that the Hong Kong ETFs may not see significant inflows and predicts the total amount could be less than $1 billion. He said:

“Our $500m is estimate for all of them combined”.

Balchunas cited several reasons for his skepticism, including the small size of the Hong Kong ETF market, which is currently valued at roughly $50 billion.

According to Balchunas, Hong Kong-based ETFs are also inaccessible to Chinese locals for official investment. The market is dominated by three minor issuers — Bosera, China AMC, and Harvest — without participation from major firms like BlackRock.

Additionally, the ecosystem supporting these ETFs is less liquid and efficient, potentially leading to wide spreads and premium discounts. Furthermore, these ETFs are expected to have fees ranging from 1-2%, significantly higher than the much lower fees often seen in US ETF markets.

Balchunas‘ data indicates that Fidelity’s FBTC inflow streak in the US concluded at 63 days on April 12, with zero inflows; however, noteworthy, there were no outflows either.

Meanwhile, BlackRock IBIT remains active for 64 days and is poised to match USMV for the top 14 spot of all time.

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