Asia-Pacific policymakers have been prime movers, wittingly or unwittingly, in boosting the region's exchange-traded fund market, with local money managers capturing the bulk of the resulting opportunities.
Foreign managers, by contrast, are focused for now on the growing ranks of institutional investors in the region eyeing overseas ETFs as a means of diversifying their portfolios.
The Bank of Japan has had the largest impact on the market since 2013, when the central bank began buying billions of dollars of Japanese equity market ETFs every month in an effort to support the country's economy.
The BOJ's ETF holdings have grown to ¥26.63 trillion ($247 billion), or more than 40% of the $599 billion Asia-Pacific tally — as of June 30 — compiled by London-based independent research and consultancy firm ETFGI LLP.
The BOJ's holdings are roughly equal to the combined $244.3 billion of ETFs listed in the 14 Asia-Pacific markets besides Tokyo tracked by ETFGI.
Other regulatory moves that have spurred ETF growth in the region include Taiwan's decision to let local insurers work around a ceiling on overseas investments by buying Taipei Stock Exchange-listed ETFs with underlying exposure to U.S. bonds, which unleashed $14 billion in net purchases over the past year, and a crackdown by mainland authorities on loosely regulated wealth management products, which helped fuel 50% growth for China's ETF market over the past year.
Those policy-driven cases "give the APAC region a distinct flavor" vis-a-vis ETF markets in the U.S. and Europe, noted Tyler Cloherty, senior manager and head of the knowledge center at money management consulting firm Casey Quirk, a practice of Deloitte Consulting LLP.
While similar regulatory openings can be seen in other markets — for example, insurance firms in the U.S. have moved into ETFs after they were classified recently as individual securities on insurers' balance sheets — they account for "a much smaller proportion of the overall market relative to what you see in APAC," said Mr. Cloherty.