Deutsche Asset & Wealth Management debuts first currency-hedged China A-Shares ETF

Oct 21st, 2015 | By | Category: Equities

Deutsche Asset & Wealth Management (Deutsche AWM), the provider of the db X-trackers range of exchange-traded funds, has announced the launch of an ‘industry first’ ETF, the db X-trackers CSI 300 China A-Shares Hedged Equity ETF (NYSE: ASHX). The fund is the first of its kind to offer direct access to firms based in mainland China while avoiding unwanted currency fluctuations between the Chinese yuan and the US dollar.

Deutsche Asset & Wealth Management debut first currency-hedged China A-Shares ETF

Deutsche AWM has pioneered the first ever China A-Shares ETF which offers an in-built currency hedge.

The fund aims to deliver the local currency performance of the CSI 300 Index which is comprised of the 300 most representative – as measured by a combination of market capitalisation and liquidity – A-shares listed on the Shanghai and Shenzhen stock exchanges.

Fiona Bassett, Head of Passive in the Americas, commented: “As the first provider of a China A-shares ETF to the US market and as a leading provider of currency-hedged ETFs, we believe ASHX truly showcases our capabilities as we endeavour to deliver timely and relevant solutions to the market. With ASHX we aim to capture the growth of one of the world’s fastest-growing economies, while minimizing exposure to currency volatility.”

Although heightened volatility in Chinese equity markets wiped 43.5% off the value of the CSI 300 between its peak on 8 June and 26 August 2015, Deutsche AWM provide a compelling case for investors to continue holding A-Share exposure within their portfolios. Increased government spending as well as further deregulation and liberalisation of financial markets are expected to support demand in the future. Furthermore, while the economy is clearly slowing, the Organisation for Economic Co-operation and Development project gross domestic product in the Asian giant to grow by a respectable 6.7% next year.

The decision by the Chinese government to allow market forces to play a greater role in renminbi currency markets has prompted investors to revisit the currency risk aspect of their portfolios. Indeed, between 10 August and 25 August, the yuan weakened by more than 3% against the US dollar, causing USD/Yuan volatility to spike and remain at elevated levels. The new offering from Deutsche AWM employs in-built currency hedges, allowing investors to isolate and capture the performance of pure large- and mid-cap Chinese A-share equities.

The specialisation in currency-hedged offerings has been fortuitous for the firm in this environment, contributing to an impressive 360% growth in assets under management (AUM) within the db x-trackers platform since the start of the year (figures as of 15 October 2015). The platform has reached $19.6bn in the US, ranking it as one of the fastest growing ETF brands in the country. World-wide AUM in the db x-trackers platform stood at $76.9bn as of 30 September 2015.

As of 20 October 2015, the fund was leaning towards the financials (38.1%), industrials (18.4%), consumer discretionary (10.5%), information technology (7.1%) and materials (6.7%) sectors. There is a total expense ratio of 0.85%.

The US db x-trackers platform now offer a suite of currency-hedged ETFs which target exposure in the Asia Pacific region. These include:

MSCI Asia Pacific ex Japan Hedged Equity ETF (DBAP)

MSCI Japan Hedged Equity ETF (DBJP)

MSCI South Korea Hedged Equity ETF (DBKO) 

Japan JPX-Nikkei 400 Hedged Equity ETF (JPNH)

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