China's top funds seek to launch Bitcoin spot ETFs through their Hong Kong subsidiaries

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Prominent Chinese asset managers, including Harvest Fund and China Southern Fund (CSOP), are applying for spot Bitcoin exchange-traded funds (ETFs) through their Hong Kong subsidiaries, according to a new report from Securities Times, a China-based financial publication.

At the end of 2023, Harvest Fund had around $210 billion in assets under management, while Southern Fund managed over $280 billion. If approved, these institutions’ ETF products could bring greater legitimacy and trust to Bitcoin ETFs in Hong Kong, potentially drawing a new breed of participants.

China Southern Fund’s Hong Kong unit is known for launching Asia’s first Bitcoin and Ethereum futures ETFs. Since its debut, the CSOP Bitcoin futures ETF (03066.HK) has seen a positive market response, as the Securities Times noted. Its net value increased by around 34% in 2023 and yielded a return rate of 51.53% over the first three months of this year. In addition, the average daily trading volume of this ETF has been substantial, maintaining around HK$30 million, surpassing many public Hong Kong stock funds.

Leading public fund companies rush into the Bitcoin ETF market as they see it as a way to diversify their offerings and potentially gain an edge in the Hong Kong stock market, crowded with competition among 2,000 asset managers, Securities Times noted.

These advancements, in addition to creating a level playing field, are part of a broader trend aimed at fostering robust and responsible virtual market development by Hong Kong’s regulatory authorities. With more than 220 web3-related companies setting up in Hong Kong, the region is poised to balance development and regulation in the virtual assets space.

The growing trend comes amid a surge in demand for the ChinaAMC CSI SH-SZ-HK Gold Industry Equity ETF, a Hong Kong-traded ETF that invests in gold mining companies. According to a recent report from Bloomberg, the Hong Kong gold ETF market is experiencing a period of high demand and volatility due to a troubled economy with falling stock prices, real estate woes, and low deposit rates.

Regulatory approval for spot Bitcoin ETFs in Hong Kong is expected as early as the second quarter of 2024. Industry experts believe this will be a major opportunity for fund issuers and could significantly increase trading volume.

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