China launches first iron ore ETF

China has launched its first iron ore exchange-traded fund, marking the latest milestone in the emergence of Chinese commodity ETFs.

Hong Kong Exchanges and Clearing said in a statement it made available to trade on Friday its first iron ore futures ETF, called SSIF DCE Iron Ore Futures Index ETF.

The ETF, based on Dalian Commodity Exchange (DCE) iron ore prices, is the first ETF launched by Shanxi Securities International Financial Holdings Limited (SSIF), a Hong Kong-based broker.

“We are excited to see the first listing of an iron ore ETF at HKEX, another important step forward in our commitment to build a vibrant and comprehensive ETF market in Hong Kong,” said Brian Roberts, HKEX’s head of Exchange Traded Products.

Roberts added: “With a continuously expanding portfolio of products, Hong Kong is fast-becoming Asia’s ETF hub, where investors can gain access to targeted exposure and complete their portfolio construction in one place.”

The Hong Kong exchange said its average daily turnover of exchange-traded products including ETFs almost doubled in the first three months of this year to $7.9 billion from $4.6 billion at the end of March last year.

In a separate announcement, HSBC said it has been appointed as the trustee and depositary bank for the iron ore futures ETF.

HSBC is the only foreign depositary bank approved by the DCE, after it was approved by the China Financial Futures Exchange in 2013 to provide futures margin depository services to offshore investors.

Patrick Wong, head of China business development and client management at HSBC securities services, said:  “Gaining straightforward exposure to key commodity benchmarks is particularly important during volatile times, so we are delighted to support Shanxi Securities with this ETF, through our comprehensive, one-stop cross-border services.”

Wong added: “We have seen increasing overseas demand for DCE market access and this innovative launch marks greater connectivity between Hong Kong and mainland Chinese exchanges.”

Haimo Zhang, head of research and fund manager head of asset management at Shanxi Securities, added: “This ETF is considered to be an important strategy for internationalising Chinese commodity futures. Although the fund is launched in the current challenging environment, we expect stable growth of the fund with a boom by the end of 2021.”

DCE said in December it planned to develop more ETF products to enable investors to participate in the derivatives market after it launched a soybean meal futures ETF on the Shenzhen Stock Exchange.

The Chinese commodity exchange said in December: “DCE will support more market institutions, including publicly offered funds, to develop and list more commodity futures investment products, thus better serving the real economy and market participants.”