How To Invest

Global X ETFs Hong Kong offers a range of income-oriented ETFs whose distribution schedules are pre-defined (dividend amount or dividend rate is not guaranteed, the dividend may pay out from capital), typically distributing income quarterly or semi-annually *. In the months of distribution (e.g. March, September), distribution is typically paid on the last business day of the month and the ex-dividend date would be four business days prior to the last business day of the month.

To be entitled to the next dividend payment, investors need to invest at least one business day before the ex-dividend day. Investors would not be entitled to the next dividend payment if an investment was made on or after the ex-dividend date.

While the Global X Hang Seng High Dividend Yield ETF (3110) did not make a distribution in 2019, it does not mean there was no dividend return for that year. The ETF re-invested the dividends on behalf of its investors instead of paying them out. As a result, the ETF’s total return, including dividend return and capital appreciation, are closely correspond to the return of its benchmark in the calendar year of 2019. Since incepted in 2013, the ETF’s relative return against its benchmark, also known as tracking difference, have been reasonably tight.

Source: Mirae Asset, 2021

In fact, in the last three calendar years, 3110 has been paying dividends consecutively in March and September. As the ETF grows in asset size, dividend distribution has been more consistent. Historical dividend record and risk factors are available on Global X Hong Kong’s website  https://www.globalxetfs.com.hk/funds/hang-seng-high-dividend-yield-etf/ .

All the income-oriented ETFs offered by Global X ETFs Hong Kong are index-tracking, seeking to provide investments results closely correspond to the performance of their benchmark. While the ETFs aim to deliver a dividend yield broadly consistent with their benchmark (dividend amount or dividend rate is not guaranteed, the dividend may pay out from capital), our ETF portfolio management team also takes practical consideration into account, such as fees and expenses, tracking difference, and historical dividend amount, in order to derive the dividend amount prudently. *

The ETF’s distribution is sourced from the dividends paid from the underlying holdings. In Hong Kong, most listed companies pay dividend in summer time; therefore, the distribution from Global X Hang Seng High Dividend Yield ETF (3110) in the September cycle tends to be larger than the distribution in March cycle.

Historical dividend record and risk factors are available on Global X Hong Kong’s website  https://www.globalxetfs.com.hk/funds/hang-seng-high-dividend-yield-etf/ .

In the event when an ETF grows rapidly in a short period of time, the ETF may need pay out of capital. This is due to the new inflow investing after the ex-dividend date of the underlying constituents would not be entitled to dividends. To fulfil the its objectives of delivering a dividend yield broadly consistent with its benchmark, the ETF would need to pay out of capital. In just the first 9 months of 2022, Global X Hang Seng High Dividend Yield ETF (3110) gained a lot of traction amid a volatile environment and grew more than double in size, leading the ETF to pay out of capital in the September 2022 cycle*.

However, it is noteworthy that dividend would be considered as dividend return when it is distributed, or capital return when it is re-invested. Therefore, no matter 3110 pays dividend out of capital or not, the total return of the ETF, including dividend return and capital return, would not be affected.

As a rule of thumb, Global X ETFs listed in Hong Kong aim to minimize % of dividends paid out of capital at all times.

While the most visible source of ETF liquidity is the turnover available “on screen” from public financial websites or applications, it doesn’t indicate an ETF’s total liquidity. In addition to on screen liquidity, ETF has another layers of liquidity –hidden liquidity and underlying liquidity. In fact, on screen turnover is often the smallest portion of an ETF’s liquidity.

ETF has a layer of hidden liquidity provided by exchange-registered traders called market makers. Market makers help maintain an orderly market by selling ETF units to potential buyers and by buying ETF units from potential sellers. To do so, market makers typically hold an inventory of ETF units. When investor places an order exceeding what is available on screen, those market makers are able to facilitate the trades with their ETF inventories. All Global X Hong Kong’s ETFs have at least one designated market makers.

Unlike stock, ETF is an open-ended fund that has a variable number of units. If investor would like to buy in a large amount, participating dealers who are often market makers can create more ETF units with Global X and subsequently sell the units to the investor to fulfil his/her demand. Similarly, if investor would like to sell in a large size, dealers can buy from the investor and subsequently redeem ETF units from Global X. With this “creation” and “redemption” mechanism, ETF is essentially as liquid as its underlying securities. Investors are unlikely to fail liquidating their ETF positions when needed.

To avoid paying excessive transaction cost, investors are advised to execute ETFs with a “limit order”. A limit order enables investor to set a price at which he/she is willing to buy or sell an ETF. When setting the price limit, investors might reference to the indicative net asset value (“iNAV”) available on our website, instead of simply taking the bid or ask quotes available on screen. iNAV is a true measure of the intraday value of the ETF’s portfolio holdings.

If a market order is used instead, ETF might be executed at a price higher or lower than necessary.

Should you require further assistance trading Global X ETFs listed in Hong Kong, please email to GlobalXETF@miraeasset.com