The "Japan-Southeast Asia ETF Summit: Navigating New Possibilities" was held on Nov. 15 in Singapore against the backdrop of global economic volatility and rising inflation bringing passive investments, such as Exchange Traded Funds (ETFs), to the fore. It was hosted by the Japan Exchange Group (JPX), and discussions centered on the latest product trends, strategic trading insights, and effective institutional ETF use cases.

Hiromi Yamaji noted that the Nikkei 225 index has reached its highest level in 33 years. Moreover, deflationary trends in Japan have given way to inflation, making individuals increasingly interested in investment, said Yamaji.

"How can foreign investors access this attractive Japanese market? One of the most convenient ways is by investing in ETFs listed in Tokyo," he said. He highlighted the market's liquidity, tight spreads, and continuous efforts to make it more accessible to investors.

"As part of the effort to make the Japanese market more attractive, JPX has been working on various initiatives like corporate governance reforms, which is gaining attention from domestic and foreign investors," Yamaji said.

The first keynote address was delivered by Craig Lazzara. His presentation, titled "Evolving ETFs and Index Ecosystem: The Effectiveness of Passive Strategies," focused on the growing popularity of ETFs, particularly assets tracking the S&P 500 index. "At the end of 2022, we estimated about $5.7 trillion tracked to the S&P 500," Lazzara said.

He attributed the growth in part to the challenges of active investing. "Most active managers fail most of the time … the average expense ratio for actively managed equity funds in the U.S. in 2022 was 66 basis points vs. 5 basis points for index funds, " which is a financial drag on performance.

Lazzara also challenged the conventional belief that more concentrated portfolios lead to better performance. "As portfolios become more diversified, the likelihood of outperformance goes up because stock returns are positively skewed" he said.

He underlined the robust future growth of ETFs globally, particularly in Asia, where there are opportunities for diversified and specialized ETFs.

The second keynote address was presented jointly by Peter Loehnert and Giri Rajendran.

Their presentation, titled "Acceleration of ETF Market Expansion and its Growth Drivers," highlighted Japan's economic resurgence-GDP growth is on track to hit 2%, a historical high.

Loehnert highlighted BlackRock's pioneering role in Japan's ETF market, recent launches, and fee reductions to enhance accessibility. Citing BlackRock CEO Larry Fink, he said: "History is repeating itself. Japan is undergoing a series of extraordinary economic transformations."

Rajendran stressed on BlackRock's belief in the boldness of Japan's current policy-making approach. "Higher inflation will likely incentivize the flow of $7 trillion towards higher-return assets. … We are at the start of a multi-year transformation in the economic landscape in Japan," he said.

In the next keynote presentation, "Excellence in Execution: How investors access the liquidity of Japan-listed ETFs," Anson Chow highlighted the need for the right execution strategy. "In recent years, a lot of attention has been put into the execution of ETFs," said Chow.

He noted that nowadays both retail and institutional investors adopt ETFs, which are flexible as they can be traded both during and outside exchange hours.

"ETF liquidity is not limited to what you see on the exchange," Chow explained. He detailed the secondary market liquidity on exchanges, as well as OTC spaces and the primary market for creation and redemption.

In his presentation "Latest updates on Japan's ETF Market and TSE Initiatives," Daisuke Tanaka said Tokyo, with an AUM of $460 billion, is the biggest ETF market among Asian countries.

Tanaka highlighted Tokyo's unique characteristics such as its time zone, offering real-time access to Japanese asset-related ETFs, even outside Asian business hours. This emphasizes Tokyo's strategic positioning as a global financial hub, facilitating efficient trading across different time zones.

Discussing liquidity, Tanaka shared, "With an average daily turnover of 100 billion Japanese yen, Tokyo-listed Japanese Equity ETFs provide ample liquidity." He explained the various trading venues for Japanese ETFs, including on-screen order books, OTC markets, and the CONNEQTOR platform.

"I'd like to encourage you to pay close attention to the Japanese ETF market as it broadens your investment opportunities," he concluded.

"Flows to APAC strategies have grown faster than all other regions. It is important to improve discoverability and comparability through the use of quality data and innovative technology," said Andrea Mosconi, Global Head of Equity, Research and Listed Services Product at Bloomberg.

Mosconi made a presentation titled "Obtaining and Analyzing Data of Japanese ETFs with Bloomberg" at the summit, in which he emphasized Bloomberg's positive outlook on ETFs. "We invest a lot in data and technology," he said.

Mosconi discussed the importance of data:"We offer vertically integrated solutions, whether you manage or invest in active or passive ETF funds. We have both primary and secondary market liquidity data and have invested in better datasets, discoverability, and holdings-based analytics to help clients analyze funds."