Exchange-traded fund giant Vanguard will close its Hong Kong office following a strategic review and place the regional focus on mainland China.
«Vanguard has taken the decision to exit its ETF business in Hong Kong in order to enable it to channel its human and financial capital in the region towards initiatives that are more closely aligned with its strategic focus and provide a long-term platform for scalable growth,» according to an exchange filing.
A spokesperson for the firm confirmed the move, which will occur over a six to 24-month period, and added that Vanguard’s «future focus in Asia is on mainland China» where the region’s primary office will be shifted to Shanghai. In addition, Vanguard will also close its offices in Japan.
Meanwhile, it is seeking an «orderly exit» from its six ETFs listed in Hong Kong and is mulling unwinding options such as the appointment of an investment manager of each fund for delisting.
Hong Kong to Mainland Wave
Vanguard is not alone as financial institutions deemphasizing Hong Kong in favor of mainland China. Recently, Japan’s Daiwa Securities also expressed the desire to accelerate a shift in operations out of Hong Kong, highlighting political risks.
«If facts emerge such as people getting arrested one after another, we may need to front-load it,» said Keiko Tashiro, deputy president at Daiwa which is seeking approval for a mainland joint venture with plans for a launch by year-end. «Once the joint venture is established, we can do China business in China.»
«Unfortunately, from a distribution business standpoint, the current industry dynamics are better suited to institutional investors and do not currently support the scale needed for [retail investors],» Vanguard’s spokesperson added. «Should these dynamics change longer-term, we cannot rule out the possibility of resuming services more aligned with our strategic priorities at a future date.»
