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Interactive Brokers Hong Kong - What Happens if Your Broker Goes Bust?

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  1. #11

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    Goodness, that is a long time horizon! Luck you for having such a long scope of time.
    My two cents: If you are really looking at about 35 years, you should maybe try to be more risky with your portfolio i.e. 100% in equities for about the first 15 years. No need for bonds at this stage. Then after 15 years, move gradually more and more into bonds/fixed income over the years until you are primarily invested in bonds/fixed income (perhaps 60-80%) by the end of the time horizon.

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  2. #12
    Original Post Deleted
    Interesting, I hadn't even considered the issue of survival and liquidity of the ETF. What exactly would be the metric for a "liquid" ETF? For example, Bloomberg lists Vanguard's FTSE Developed Europe Index (3101:HK) as having a trading volume of 9,300. Is that good, bad, OK? What should I be looking at for liquidity?

    Second question - any banks in HK that you recommend for purchasing ETF's on the LSE?

  3. #13
    Quote Originally Posted by David Ogilvie:
    I'm also doing the same: investing in ETFs through an Interactive Brokers account. Interested to hear which ETFs you have chosen. At the moment, I have stuck to Vanguard ETFs 3140, 3101, 2805, and 3126. Big fan of Vanguard but I do have some small concerns about the liquidity of these ETFs due to the low AUM: whether or not this worry is warranted, I'm not entirely sure to be honest.
    The chance of Interactive Brokers going bust is very small, so interested to hear that you are looking at opening a custody account with the exchange directly: this is not something I realised you could do, so would love to hear how that account opening goes.
    @David Ogilvie, Vanguard's S&P 500 (3140) trading volume is listed at 31,500 on Bloomberg.

    Can you provide a bit more insight into what you're looking for regarding the liquidity of the ETFs? What AUM number would be a "good" number to consider an ETF liquid?

  4. #14

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    @Aakash123 - DBS for UK stocks. Not cheap by any means, but if you want a regulated bank, they're the only option outside of HSBC Expat (in which case, your shares are with HSBC UK).

    HSBC does allow for some sort of UK stock trading for retail HK customers, but it is over the phone and EXPENSIVE.

    What AUM number would be a "good" number to consider an ETF liquid?
    First - does the %age "expenses" charge on the ETF pay the bills (AUM * expenses charge). At some point the smaller ETFs tend to not pay the bills and at that point, they become problematic for everyone concerned.
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  5. #15
    Quote Originally Posted by shri:
    @Aakash123 - DBS for UK stocks. Not cheap by any means, but if you want a regulated bank, they're the only option outside of HSBC Expat (in which case, your shares are with HSBC UK).

    HSBC does allow for some sort of UK stock trading for retail HK customers, but it is over the phone and EXPENSIVE.
    Thanks @shri! Very helpful!

  6. #16

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    I could be wrong with DBS being the only bank. They're the only bank I found while researching UK/SG stocks. We have also used Saxo.

    Also, the transactional cost in my opinion, while expensive compared to IB, is irrelevant if you're looking at a long term buy/hold deal.

    One other option (and this might be expensive and might be convoluted) is to buy at IB and then transfer to DBS etc.

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  7. #17

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    I actually asked a similar question on this forum about a week ago but have not had any response yet. Perhaps keep an eye on the thread: https://geoexpat.com/forum/155/thread355062.html
    I don't have an AUM number in mind but there have been questions, including on geoexpat, about 3140's liquidity. However, this and other Vanguard ETFs have grown increasingly popular in the last few years so I would expect the liquidity to go up over time. I don't think it is likely that Vanguard will close these ETFs due to lack of AUM anytime soon, but who knows what could happen with a 30-40 year horizon. It's something to keep in mind as a relative risk. Someone else on this thread mentioned that Vanguard has closed ETFs in the past in HK, although I can't find any info on this. BlackRock has definitely closed down ETFs in the past in HK.

    Bear in mind that the smaller the AUM, the harder it may be to liquidate your portfolio. Up to you, but you may want to also include 1-2 other broad ETFs in your portfolio with decent liquidity (2800 ETF comes to mind, with the added bonus that you can set up automated investing into it every month with your bank) to counter the risk. I started buying 2800 ETF through automated investing via my HSBC account recently. The AUM under 2800 is huge and you won't have any problems later on with liquidation, whilst the fees on this ETF are even lower than Vanguard's.

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  8. #18
    Quote Originally Posted by shri:
    I could be wrong with DBS being the only bank. They're the only bank I found while researching UK/SG stocks. We have also used Saxo.

    Also, the transactional cost in my opinion, while expensive compared to IB, is irrelevant if you're looking at a long term buy/hold deal.

    One other option (and this might be expensive and might be convoluted) is to buy at IB and then transfer to DBS etc.
    Interesting.

    I've just arranged a meeting on Friday with DBS to find out more about their fees, etc. Anything I should be aware of when buying from a bank as opposed to a brokerage?

    You say you've used Saxo - do you mean Saxo Capital? Are they listed as a broker or a bank in HK?

  9. #19

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    Saxo - Brokerage owned by a Danish Bank which in turn is owned by a Chinese car manufacturer.

    You don't need to meet them to figure out charges - their sheet of charges should be online.

    Both these options have been discussed a fair bit on the forums.

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  10. #20

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    Start reading from page 13.

    https://www.dbs.com.hk/iwov-resource...ankcharges.pdf

    Quote Originally Posted by Aakash123:
    Interesting.

    I've just arranged a meeting on Friday with DBS to find out more about their fees, etc. Anything I should be aware of when buying from a bank as opposed to a brokerage?

    You say you've used Saxo - do you mean Saxo Capital? Are they listed as a broker or a bank in HK?