Lyxor International Asset Management, a unit of Paris-based Societe Generale SA, listed two more synthetic exchange-traded funds in Singapore, two months after announcing it would delist such products in Hong Kong following a tightening of regulation.
The funds, tied to Thai and Indonesian stock indexes and cross-listed in Europe, began trading on the Singapore exchange last week, Herman Chen, Lyxor’s Hong Kong-based head of ETF distribution in Asia, said by phone today.
Singapore may overtake Hong Kong as Asia’s hub for synthetic exchange-traded funds because of regulatory change in the Chinese special administrative region, Boston-based financial research firm Celent said in a January report. Singapore is the only Asian country where Lyxor plans to list more ETFs this year, Chen said.
“In Hong Kong our top priority is to smoothly delist everything,” Chen said.
In August, Hong Kong’s Securities and Futures Commission introduced new requirements for synthetic ETFs incorporated in the city. The products must now be supported by collateral of at least 100 percent of the value of funds, or 120 percent if backed by equities.
Chen denied Lyxor decided to delist its 12 Hong Kong funds because of the new regulations. The decision was made to reduce expenses, and the company decided to focus on institutional, rather than individual, investors in Asia, he said.
“Keeping two platforms running at the same time is very costly,” Chen said. “A lot of people think we were responding to the SFC regulations, but we weren’t.”
Moreover, the Hong Kong regulator’s new rules only apply to locally-registered funds, Chen said. They “don’t apply to cross-listed ETFs like ours.”
Singapore has made it harder for individuals to invest in complex financial products like synthetic funds. The island-state introduced a rule on Jan. 1 requiring investors to pass a financial-knowledge test before they can buy ETFs or other “specified investment products,” if they don’t possess certain educational qualifications or have relevant work or trading experience.
Lyxor, which manages $35.3 billion of index tracker and exchange-traded funds, said the last trading day of its Hong Kong-listed funds would be March 7.
It now has 28 synthetic ETFs listed in Singapore.