International Market ETFs

An ETF (Exchange Traded Fund) is an investment product that trades on an exchange and typically tracks the performance of an index, industry, or theme. International market ETFs refer to ETFs that invest in non-local markets, such as the United States, Europe, Asia or emerging markets. International market ETFs allow investors to diversify their investments into different regions, economies and industries around the world through one product, thereby reducing risks and increasing return potential.

Why invest in international market ETFs?

Investing in international market ETFs has the following benefits:

Seize global opportunities: International market ETFs allow investors to participate in economic growth and innovation around the world, such as artificial intelligence, electric vehicles, the Metaverse and other topics. At the same time, investors can also use international market ETFs to capture price differences and exchange rate fluctuations between different regions, thereby obtaining higher returns.

Diversify risks: International market ETFs can help investors reduce their reliance on a single market or stock, thereby reducing the impact of geopolitics, natural disasters, policy changes and other factors. In addition, international market ETFs can also provide different volatility and correlation than local markets, thereby increasing the robustness of the investment portfolio.

Convenient and fast: International market ETFs allow investors to gain exposure to multiple countries or regions through one product, without having to open different securities accounts one by one or go through cumbersome trading procedures. In addition, international market ETFs also have the characteristics of low cost, high transparency, and high liquidity, making it convenient for investors to trade and monitor.

How to choose an international market ETF?

When choosing an international market ETF, investors need to consider the following factors:

Target index: Different international market ETFs may track different indexes, such as the MSCI World Index, MSCI Emerging Markets Index, FTSE 100 Index, etc. Investors need to understand the target index’s constituent stocks, weight distribution, calculation methods and other details to ensure that it meets their investment objectives and risk tolerance.

Expense ratio: The expense ratio refers to the annual operating expenses of an international market ETF as a percentage of its total asset value, which usually includes management fees, custody fees, audit fees, etc. The lower the expense ratio, the higher the net return to investors. Investors can check the expense ratio of an international market ETF in its fund prospectus or website and compare it with similar products.

Tracking error: Tracking error refers to the difference between the actual performance of an international market ETF and the performance of its target index, usually due to factors such as transaction costs, taxes, cash holdings, and sampling techniques. The smaller the tracking error, the more accurately an international market ETF can reflect the movement of its target index. Investors can check the tracking error of the international market ETF in the fund prospectus or website and compare it with similar products.

Trading volume and liquidity: Trading volume and liquidity refer to the trading volume and price fluctuations of international market ETFs on exchanges, which usually reflect the market demand and supply for the product. The higher the trading volume and liquidity, the easier it is for investors to buy and sell at reasonable prices and reduce transaction costs. Investors can view the trading volume and liquidity of international market ETFs on exchanges or other financial platforms and compare them with similar products.

What are the international market ETFs?

Hang Seng China Enterprises Index ETF (02828.HK): tracks the performance of mainland Chinese companies (H shares) listed on the Hong Kong Stock Exchange. Its constituent stocks include China Mobile, China Construction Bank, Tencent Holdings, etc.

FTSE 100 Index ETF (03111.HK): Tracks the performance of the UK's 100 largest companies listed on the London Stock Exchange. Component stocks include British American Tobacco, Nestlé, Henkel, etc.

MSCI Emerging Markets Index ETF (02834.HK): tracks the performance of companies from emerging markets such as Asia, Latin America and Europe. Component stocks include TSMC, Alibaba, Samsung Electronics, etc.

MSCI World Index ETF (03010.HK): tracks the performance of companies from 23 developed markets around the world. Its constituent stocks include Apple, Microsoft, Amazon, etc.

Metaverse Theme Index ETF (03088.HK): tracks the performance of companies engaged in metaverse-related businesses or technologies. Constituent stocks include Facebook, Nvidia, Unity, etc.