HKEX sees first covered call ETFs; posts 2023 results; Belle Fashion eyes return

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. 

 

Second best results

 

Aguzin leaves after revenue and other income and profit in 2023 were the second best on record, after an “exceptional” 2021.

2023 revenue and other income was HK$20.5 billion, 11% higher than 2022, while profit attributable to shareholders was HK$11.86 billion, 18% higher than 2022. Core business revenue was up 3% against 2022, as a result of a "record net investment income" from margin funds and clearing house funds, and an increase in London Metal Exchange trading and clearing fees in 2023, according to a HKEX results announcement on February 29. 

The increase was partly offset by lower trading and clearing fees from lower listing fees.

The net investment income from corporate funds was HK$1.49 billion, compared with a loss of HK$48 million in 2022, driven by gains on the external portfolio of HK$421 million, which saw losses of $486 million in 2022, and higher investment income from internally-managed corporate funds. These were partly offset by the non-recurring losses on valuation of the group’s unlisted equity investments of HK$246 million.

Operating expenses were 7% higher than 2022, attributable to higher staff and IT costs. 

Aguzin said in the announcement: “HKEX delivered a strong set of 2023 full-year results, fuelled by notable growth in its derivatives, fixed-income and currencies business. Despite the persistent challenging global backdrop and softer cash market, we are pleased to be reporting our second-best revenue and other income, and profits, on record, with profit attributable to shareholders for 2023 up 18%.”

He added: “Excellent strategic progress complemented the group’s financial performance, with delivery of new milestones in the Connect programme, including the launch of Swap Connect and HKEX Synapse; the opening of new group offices in New York and London, better supporting our customers on-the-ground across time-zones; and the rollout of new enhancements to HKEX’s listing franchise, including Chapter 18C and the launch of FINI."

"A particular highlight [in 2023], has been the success of the group’s continued product diversification focus and market microstructure enhancements, which have been instrumental in driving new daily trading records in 2023 for HKEX’s equity derivatives, Rmb Currency Futures, OTC Clear and ETP markets," Aguzin continued. 

Looking ahead, he said: “Whilst the macroeconomic and geopolitical environment remains turbulent, we are cautiously optimistic that, as sentiment improves, we are well placed to capitalise on the global pivot to Asia, on Hong Kong’s unique role as an East-West superconnector, on our unrivalled China advantage and on the megatrends, such as sustainability, that are shaping capital markets around the world.”

Belle Fashion

Meanwhile, Chinese fashion chain Belle Fashion, which delisted from the HKEX in 2017, is eyeing a return to the exchange after filing a listing application. 

Belle Fashion Group is a large-scale Chinese fashion footwear and apparel group. Its predecessor, Lihua Shoes, was founded in Hong Kong in 1981. It has 19 core brands covering shoes, clothing and accessories for women, men and children. The firm, headquartered in Shenzhen, has more than 8,300 directly-operated stores in more than 300 cities in China.

The firm has appointed BoA Securities (Merill Lynch Asia Pacific) and Morgan Stanley Asia as overall coordinators. 

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