Despite the funds’ recent positive performances, investors still pulled a significant volume of cash from ETFs with exposure to Hong Kong equities.
The outflows have been driven by the ongoing protests being demonstrated by Hongkongers who are fighting against the proposed extradition law. If approved, the law would allow fugitives seeking haven in Hong Kong being handed back to China which puts fear in the locals that the HK legal system has been compromised by its communist neighbour.
In tandem with the protests, the ETFs which are comprised of HK-based securities have been performing reasonably well, according to data from Ultumus. The iShares MSCI Hong Kong ETF (EWH) and the Lyxor Hong Kong UCITS ETF (HSI) saw their Net Asset Values rise 3.3% and 5.3%, respectively, over the course of last week.
Regardless of this performance, investors have lost confidence in the region’s asset class as both of the mentioned ETF’s suffered negative net flows. EWH lost $59.8m and HSI lost $24.3m during the week commencing 17 June.
It is still early days, so it is hard to say if this is the first puncture with more cash on its way out or just nervous investors being overly cautious. However, Hong Kong’s interbank borrowing rate has reached a decade long high suggesting there is a growing demand for cash between banks.