Trading ETFs in Asia: Approaches for accessing liquidity in different market conditions - Part 1

In this first article of a two-part series on ‘Trading ETFs in Asia’, we look at the increasing popularity of ETF trading and Asia’s approach to this asset class.

In periods of heightened market volatility, trading activity in exchange-traded funds (ETFs) intensifies, often resulting in record-breaking executed volumes. In March 2020, investors and traders continued to use ETFs to transfer risk quickly and efficiently, as evidenced by the year-over-year increase of 225.6% in global ETF activity on Tradeweb. During the same month, data from ETFGI showed that globally-listed ETFs and exchange-traded products (ETPs) saw net inflows of USD 20.44 billion, bringing year-to-date net inflows to USD 119.13 billion, up from the USD 99.06 billion gathered at this point last year.

Asia is a particularly interesting case point when it comes to trading ETFs due to the large regional and regulatory differences. However, platforms such as Tradeweb, can offer value to clients because we allow clients to efficiently access liquidity all in one place. Tradeweb’s record trading numbers have also meant that our clients have been able to use our technology to optimise their execution process, because they can analyse data aggregated by our system on a much faster basis. Indeed, it is through Tradeweb’s multi-asset class and multi-protocol electronic offerings that clients can find the best approach to adapting to market volatility.

Asia’s ETF landscape

In terms of the rate of adoption for ETFs, while Asia comes in behind other jurisdictions such as North America and Europe, there has been a notable amount of growth and, therefore, potential in the region over the past few years. The Asian client-base of Tradeweb, for example, is quite broad, made up of sovereign wealth funds, asset managers, private banks, pension funds and family offices to name a few, each with their own individual trading strategies. These different investment objectives translate to our clients using the Tradeweb platform in a variety of ways, for instance to conduct a buy-and-hold strategy versus a short-term method to express views.

Be sure to read the second article of this two-part series to find out how investors in Asia can best overcome the challenges when trading ETFs here.