If you’re an investor based in Hong Kong or Singapore, your lowest cost options for a globally diversified portfolio are exchange-traded funds on the U.S. market.
The U.S. is an international supermarket—a place where you can buy New Zealand, Australian, Canadian, Asian… virtually any stock index you could ever want.
Purchasing them, however, accompanies an exchange rate hit. You won’t see it on a brokerage statement, but if you’re earning Hong Kong dollars, and you buy an ETF off the U.S. market, you’ll pay a currency spread of roughly 1 percent.
This isn’t a big deal, of course. It’s not like an ongoing expense ratio charge, like the barrage of fees associated with an insurance linked annuity, such as those flogged by Friends Provident, Zurich International or Generali, but it does further the cost (however minor) for each purchase.
A new option, however, is arriving in Hong Kong.
Vanguard has received approval for their ETFs to trade on the Hong Kong exchange. At this point, we don’t know which ETFs will be available. But their acceptance (into the exchange) is a great sign. Those living in Hong Kong may be able to purchase global ETFs without a currency hit. Time will tell which ETFs will be introduced.
And I’ll be watching closely. If enough Hong Kong based investors buy them, Vanguard ETFs might find their way, eventually, to the Singapore exchange.
As a Singapore-based expat, I’d be thrilled to see that.