HKEX sees first covered call ETF listings

Mirae Asset Global Investments (Hong Kong) has issued two ETFs, with one primarily investing in the Hang Seng Index and the other in the Hang Seng China Enterprises Index.

February 29, 2024

The Hong Kong Stock Exchange (HKEX) has, on February 29, seen its first-ever listings of covered call ETFs, according to a media release.  

The two new ETFs listed are: Global X HSI Components Covered Call Active ETF (Stock code: 3419) and Global X HSCEI Components Covered Call Active ETF (Stock code: 3416). Both ETFs have been issued by Mirae Asset Global Investments (Hong Kong) through its Global X ETFs platform, and primarily invest in constituent equity securities in the Hang Seng Index and the Hang Seng China Enterprises Index, respectively. Citi Securities Services was appointed by Global X ETFs to service the ETFs.  

A covered call is a strategy where an investor sells call options on an asset they already own, generating income in the form of a premium. This allows investors to benefit from potential asset appreciation up to the strike price, and during times of volatility, the options premiums can provide downside protection to investors, the media release said. 

Wanyoun Cho, chief executive officer (CEO) of Mirae Asset Global Investments (Hong Kong), said in another media release: “[A] covered call strategy provides a relatively stable income for investors, especially during rangebound scenarios. Global X ETFs is proud to pioneer the first covered call ETFs in Hong Kong, offering investors a unique opportunity to increase income potential and enhance downside protection.”

Exchange traded products (ETPs), including ETFs and leveraged and inverse products (L&I products), are one of the fastest-growing segments in HKEX's markets, the HKEX release said. Average daily turnover in the ETP market reached an all-time high of HK$14 billion ($1.79 billion) in 2023, up 17% from a year earlier.

Brian Roberts, HKEX’s head of equities product development, said in the February 29 HKEX release: "The two covered call ETFs listing today, the first of their kind in Hong Kong, are great additions to our diverse lineup of ETPs. The use of covered calls is an increasingly popular investment strategy as investors look to diversify beyond traditional products, navigate potentially volatile markets and hedge downside risk."

Roberts added: "This type of strategy typically requires a level of expertise and involves active trading. However, an ETF that incorporates a covered call strategy can help investors save time, generate passive income, and remove the complexity of managing downside risks on their own. We look forward to welcoming more of these and other ETFs to our markets in the coming months ahead."

Last November, Hong Kong saw the first Saudi Arabian ETF in Asia Pacific, which was also the world's largest Saudi ETF with over HK$8 billion in asset under management (AUM). 

Meanwhile the HKEX will see its new CEO Bonnie Chan, currently co-chief operating officer, start earlier than expected on Friday, March 1 to replace the outgoing Nicolas Aguzin. She will become HKEX's first ever female CEO. 

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