Samsung Asset Management has launched a blockchain-focused exchange-traded fund, the first of its kind in Hong Kong, which will track companies involved in the field including cryptocurrencies.
The company has raised US$12 million from institutional investors for its Samsung Blockchain Technologies ETF, which will trade under the stock code "3171" from June 23, said Terence Ling, head of ETF distribution at Samsung Asset Management (HK).
"The application of blockchain technologies is very wide and is not limited to cryptocurrencies. We believe that its adoption will widen to 80 per cent of the world's population by 2030 from less than 1 per cent today," said Ling.
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The ETF will not invest directly in cryptocurrencies like bitcoin, ether and other digital tokens, the most common use of blockchain, which are traded by investors looking to profit from the rise and fall in their values.
But blockchain has evolved to become the backbone for many other transactions tied to the real economy, such as trade finance between banks, and exporters and importers. Central banks, including those in Hong Kong and China, are also developing blockchain-based digital currencies to facilitate settlement of cross-border trade, insurance and bonds.
Blockchain has also underpinned the development of the metaverse, which features an immersive, three-dimensional online universe created by the convergence of physical, augmented and virtual reality. This has enabled users to take part in concerts and business conferences virtually, and virtual real estate and art to be sold in the form of non-fungible tokens.
"The ETF portfolio will initially focus on stocks listed in the US, Europe and Japan, as there are more blockchain-related companies listed in these markets," said Norman Chan, a portfolio manager at Samsung Asset Management (HK).
The top 10 holdings of the ETF are likely to include US-listed exchange CME Group, which offers bitcoin futures contracts, cryptocurrency banking group Silvergate, and IBM. It will also invest in other cryptocurrency-related ETFs such as Proshares Bitcoin Strategy ETF listed in New York.
The ETF will seek to invest in up to 60 companies, and will debut on the Hong Kong stock exchange at a listing price of US$2. It will, however, be traded in Hong Kong dollars in lots of 50 units.
This blockchain-focused fund will be Samsung Asset Management (HK)'s sixth ETF in Hong Kong, said Ling. The company is wholly-owned by Korea's Samsung Asset Management, which had US$258 billion of assets under management as of December 2021.
The market size of blockchain is expected to grow to US$228 billion by 2028, from US$4.9 billion in 2021, according to research firm The Insight Partners.
Unlike Australia, the US and Germany, Hong Kong currently has not ETF that invests in cryptocurrencies directly. The Hong Kong government is proposing to ban retail investors' participation in trading of cryptocurrencies. An amended bill of the city's anti-money-laundering ordinance this summer is expected to enact this into law.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2022 South China Morning Post Publishers Ltd. All rights reserved.
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