Eastward expansion – why Western asset managers are capturing Asia's ETF boom

International asset managers have spent decades refining their ETF capabilities in mature markets in Europe and North America. Now, they are looking east for expansion opportunities.

Rapid demand for ETFs in Asia and the Middle East, combined with intensifying competition in home markets, is pushing international managers to move from distributing offshore funds to launching products in markets like Hong Kong, India, Saudi Arabia, Taiwan, and the UAE.

"There is a compelling case for international asset managers to complement their ETF capabilities in mature markets, with cross-border issuance in newer markets where demand is strong and domestic ecosystems are still taking shape," said Rob Rushe, Global Product Head, ETF Servicing, HSBC.

And the direction of expansion is not just from west to east. As capital markets across the world become more integrated, there are more regional cross-listings between fast-growing markets, reflecting the increased significance of trade and investment flows between Asia and the Middle East.

Onshore issuance provides a meaningful advantage in building investor access. A locally listed ETF trades in the local currency, during local market hours, and settles through domestic brokers and clearing infrastructure. It is a structure that makes a fund much more attractive to retail investors, local institutions, and wealth managers, as they are able to buy and sell the product entirely within the domestic market ecosystem.

The single most attractive feature of ETF markets in Asia and the Middle East is the growth potential.

In the decade ending mid-2025, assets under management in the Asia-Pacific ETF market grew by an extraordinary compound annual growth rate of 27.9% ¹. And despite this surge, the region accounted for just 11.9% of global AUM, suggesting that there is room for more growth as Asian economies continue to develop and local investors become aware of the ETF fund structure.

Furthermore, the ETF markets in Asia and the Middle East are sometimes less competitive than in Europe and the US. Issuers in mature markets are under constant pressure to innovate by creating new products that attract the attention of both retail and institutional investors. At the same time, a crowded market forces many issuers to compete on costs, which has led to significant fee compression.

It is a very different situation in Asia and the Middle East, where some earlier-stage markets offer the potential for strong growth.

All this means that issuers with deep experience in mature-market products can build a competitive edge in a less developed market by bringing proven structures and investment capabilities where demand for those strategies is beginning to accelerate.

Take Taiwan for example. Asia’s third largest ETF market² started to allow active ETFs quite recently, at the end of 2024³. There are now already more than 25 active products on the market, which have a 37% share of all net inflows into ETFs⁴.

The rapid adoption of active ETFs in Taiwan demonstrates how quickly a new product category can go from regulatory approval to widespread adoption in a fast-growing Asian market. International asset managers have already capitalised on this new opening, as they are behind several of the new active ETFs launched over the last year⁵.

But a local listing requires full commitment to a market’s regulatory and operational requirements, creating a learning curve for issuers looking to seize these new opportunities.

One important regulatory consideration is the need for a local presence, as several major markets require that an ETF’s management company must be physically located and licensed in the jurisdiction.

And once regulatory approval is complete, issuers need to work towards making the ETF a success, since launching a product is not the same as building a market. And just because a product is successful in a home market, does not mean it will succeed without significant localisation – for instance, launching an ETF in the Middle East could require restructuring so that it is Shariah compliant.

In some markets, the primary challenge is that initial regulatory authorisation. In others, it is distributor access, market-maker participation, secondary market liquidity, or investor education. A locally listed ETF with poor spreads, limited market-maker support, and no seeded assets is unlikely to gain traction regardless of its investment merits.

In less mature ETF ecosystems, issuers may need to actively support demand creation by working with distributors, engaging market makers, and sometimes contributing seed capital to establish credible trading dynamics from launch.

Navigating the complexity of new markets requires more than a capable investment team. It requires partners with genuine local knowledge, regional connectivity, and the operational infrastructure to support multi-market issuance efficiently.

HSBC brings decades of experience supporting ETF issuers across Asia and the Middle East, combining on-the-ground regulatory and market understanding with a global network that spans the markets where international managers are most actively expanding.

For issuers managing ETF programmes across multiple jurisdictions, a consistent platform approach – one that captures custody, reporting, and operational management across markets from a single point of control – reduces complexity and supports clients through the market entry process.

“As Asia's ETF markets continue to mature and regional capital market connectivity deepens, the managers best positioned to capture that growth will be those who treat market entry as a strategic commitment,” said Mr. Rushe.