The analytics firm argues that Hong Kong is developing enthusiasm for those ETFs that are designed to capture returns from leverage or negative bets on markets.

Exchange traded funds have surged in popularity because of their status as cheap and easy ways to access sometimes hard-to-access markets, and those ETFs which make money either by bets against markets, or which can capture benefits of leverage, are becoming more popular in North Asia, says analytics firm Cerulli.

"Leveraged" and "inverse" ETFs have long been popular in Japan and Korea and, more recently, in Taiwan. Now, Hong Kong is the latest market to join these North Asian countries in this regard, the Boston-headquartered firm notes in a new report.

"Inverse" ETFs are those which capture the benefits of taking a short, or negative, position on a particular index or set of securities, while leveraged ETFs are designed to replicate the returns obtainable by borrowing money to bet on securities.

Cerulli said that data from the Taiwan Stock Exchange shows that the daily average trading volume of ETFs in Taiwan rose by 45 per cent in 2015 to 299.5 million units due to the introduction of leveraged and inverse ETFs. Cerulli expects that Hong Kong will likely experience a similar surge in trading activity in 2016 as these products go to market later in the year.

Excitement has been brewing in the space after Hong Kong authorities signaled that they were looking to expand the ETF product base in a report published by the Financial Services Development Council in October last year, Cerulli said in a report.

The organisation said that some foreign asset managers, such as Samsung Asset Management and Mirae Asset Management, have expressed their interest in bringing over their expertise in inverse and leveraged ETFs from their home market in Korea to Hong Kong. There is also a talent hunt for ETF specialists in Hong Kong which is likely to intensify, especially if leveraged and inverse ETFs take off there.

Cerulli warned, however, that it expects Hong Kong to continue to be behind the curve in developments in the ETF space compared to Taiwan. With a head start to leveraged and inverse ETFs over Hong Kong, Cerulli believes that Taiwan will continue to set the pace between the two jurisdictions for future developments in the space.