Core Viewpoint - The development of Listed Open-Ended Funds (LOF) has stagnated due to inefficiencies in redemption mechanisms, outdated market-making systems, and poor performance in active management, while Exchange-Traded Funds (ETF) have thrived, reaching a scale of 4.1 trillion yuan [1][2][4]. Group 1: Historical Context and Current Status - LOF was introduced in 2004, providing a dual trading mechanism of exchange trading and off-market redemption, enhancing liquidity for investors [2]. - In contrast, ETFs, which also launched in 2004, have seen significant growth, with nearly 1,200 ETFs available by June 2025, driven by investor preference and policy support [2]. - LOF's scale has decreased from over 900 billion yuan to around 600 billion yuan, with new fund issuance nearly halted since 2022, leading to over 30 fund liquidations [2][4]. Group 2: Market Dynamics and Challenges - LOF funds often exhibit small scales and poor liquidity, allowing minimal trading volumes to cause significant price fluctuations [3]. - The average daily trading volume for LOF is less than 13 million yuan, compared to 1.26 billion yuan for ETFs, highlighting a severe liquidity gap [4][6]. - The inefficiencies in LOF's trading mechanisms, such as cash redemption and delayed reporting of holdings, hinder investor engagement and strategy tracking [4][5]. Group 3: Recommendations for Improvement - Industry experts suggest that LOF must innovate its mechanisms to align with investor needs, potentially by adopting features from ETF trading systems [6][7]. - There is a call for LOF to explore a combination of active management and ETF-like mechanisms, such as transparent active management models that regularly disclose holdings [6][7]. - To revitalize LOF, it is essential to enhance trading efficiency and optimize investment strategies, ensuring that products meet the evolving demands of investors [7].

Market Growth - The Greater China region (Mainland China, Hong Kong, Taiwan) is the main driver of ETF market growth in the Asia-Pacific region, contributing 71% of the region's growth. In 2024, the ETF asset size in this region surged by 31% to reach $1.7 trillion, with record inflows of $347 billion [2][19]. - 71% of Greater China investors increased their ETF allocations over the past five years, with 20% reporting an increase of over 25%. Looking ahead, 99% of respondents plan to further increase their ETF investments in the next 12 months, particularly in Hong Kong (54%) and Taiwan (47%) [2][24]. - Taiwan's market has seen exceptional growth, with assets increasing by over 170% since the end of 2022, driven by a strong retail investor base of over 14 million [2][21]. Regional Characteristics - Taiwan's market is dominated by retail investors with a strong preference for specific themes such as artificial intelligence (60% view it as a leading trend for 2025) and cryptocurrency ETFs (40% plan to purchase) [3]. - Hong Kong is characterized by product innovation and serves as a cross-border hub, with 34% of investors planning to buy fixed income ETFs. Tax efficiency is a significant factor for 26% of investors when choosing ETFs [3]. - Mainland China investors exhibit a steady increase in allocations, with 74% planning to increase their ETF investments by no more than 10% in the next 12 months. There is a strong demand for offshore assets, particularly through cross-border channels [3]. Product Trends - There is a rising demand for buffered ETFs, with 29% of Greater China investors planning to invest in these products in the next 12 months, particularly in Mainland China (34%) [4]. - Interest in cryptocurrency ETFs is notable, with 26% of investors planning to invest, led by Taiwan (40%) and Hong Kong (23%) [4]. - Active ETFs are experiencing significant demand, with 100% of respondents planning to increase allocations in the next 12 months. In Hong Kong and Taiwan, 40% of investors plan to increase their allocations by over 25% [4]. Market Drivers and Challenges - Regulatory innovation is a key driver, with mechanisms like the ETF mutual access between Mainland China and Hong Kong facilitating cross-border investments [6]. - 27% of companies in Greater China are using AI tools to assist in investment decisions, indicating a growing trend in technology application [6]. - Competition among issuers is intensifying, with 76% of institutional investors planning to increase the number of ETF issuers they collaborate with. Product scale is a significant barrier, with 85% requiring a minimum AUM of $50 million [6].