Showing that Exchange Traded Funds (ETFs) are increasing in popularity, Hong Kong Exchanges and Clearing (HKEx) has developed a new market structure for this relatively new type of investment fund, which investors can buy or sell like ordinary stocks through brokers when trading of Hong Kong's first two funds commences on May 2 2001.
The first two ETFs, the iShares MSCI Taiwan Index Fund and the iShares MSCI South Korea Index Fund, are based on MSCI indices that represent investment opportunities in Taiwanese and Korean companies available to investors worldwide. These two ETFs will be traded in US dollars on the HKEx's third generation automatching system (AMS/3) continuously between 10 a.m. to 4 p.m. Brokerage commissions will be negotiable, transaction costs will be comparable to share trading and there will be no stamp duty. Settlement will be T+2, the same as with ordinary shares.
Real-time data on the underlying indices for the two iShares will be available through the Stock Exchange's trading system, Bloomberg and Reuters. In addition, end-of-the-day data on the two indices will be available in the daily quotations on the HKEx website - http://www.hkex.com.hk - and the data will also be distributed to the news media.
iShares are part of a family of over 70 ETFs developed by Barclays Global Investors, the investment management arm of UK-based Barclays PLC. The iShares MSCI Taiwan Index Fund and iShares MSCI South Korea Index Fund, which are already trading in the US, are not authorised by the Hong Kong Securities and Futures Commission.
Lawrence Fok, Deputy Chief Operating Officer of HKEx, said at a press conference that the two funds were selected because of their suitability to conditions in the Hong Kong equity market: 'After much consulting and discussion, we decided that the two funds would be most suitable for Hong Kong and they should draw healthy trading interest,' he said. He added: 'ETFs, particularly index trackers and sector baskets, have become popular in some markets. This is a global trend and so we have developed a new market structure that enables ETF sponsors to introduce a wide range of products in our market. The end result will be more choices for investors.'
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