Mainland Chinese Investors Likely Barred from Hong Kong’s Spot Bitcoin and Ether ETFs, Say Bloomberg Analysts

Bloomberg ETF Analyst Rebecca Sin has shed light on the potential challenges and prospects facing the newly approved spot Bitcoin and Ether ETFs in Hong Kong. According to Sin, mainland Chinese investors are likely to face significant barriers when it comes to accessing these funds due to existing restrictions on investing in virtual assets.

Despite the possibility of using the $50,000 remittance quota for retail investors, it remains an underutilized avenue for such investments. Furthermore, she says the prospects for institutional investors using the Qualified Domestic Institutional Investor (QDII) quota appear dim, as approvals for virtual asset ETFs under this scheme are not expected.

The cost of managing these new ETFs is also a key consideration, with anticipated management fees ranging between 1-2%. This is comparable to existing products in the market, such as CSOP’s Bitcoin Futures ETF (3066 HK) and Ether Futures ETF (3068 HK), which levy a management fee of 2% alongside an estimated 2% in additional charges.

Sin also projects that the new spot Bitcoin and Ether ETFs could potentially amass up to $1 billion in assets under management (which is a lot less than the $25 billion predicted by Matrixport). However, achieving this milestone is contingent upon the pace of improvements in both infrastructure and the broader ecosystem surrounding these products. For context, the Asia-Pacific region’s Bitcoin ETFs, which are split between three funds in Hong Kong and two in Australia, currently manage a total of $250 million in assets.

The introduction of these ETFs marks a significant development for the issuers involved—Bosera Asset Management, Harvest International, and ChinaAMC. Notably, these firms will be the pioneers in launching spot Bitcoin and Ether products in the region. Bosera, for instance, currently manages six ETFs with $40 million in assets under management, while ChinaAMC boasts 15 ETFs with a substantial $3.6 billion, and Harvest manages three ETFs totaling $10 million. These figures are set against the backdrop of Hong Kong’s entire ETF market, which holds approximately $51 billion in assets under management.

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