Deutsche Bank’s ETF platform, DB X-trackers, has expanded its London-listed emerging and frontier markets offering with the cross-listing of ETFs that provide exposure to the equity markets of Pakistan and Bangladesh.
Investing in Bangladesh and Pakistan has the potential to be highly rewarding, but expect a bumpy ride.
Pakistan and Bangladesh are among the 10 most populated countries in the world and both markets present interesting characteristics.
Pakistan has one of the lowest P/E ratios in the region, at just 7x, and an attractive dividend yield of 7.41%. Its market cap/GDP ratio is just around 20%, significantly lower than the average of emerging markets which is around 45%. This shows a large potential for future capital market growth.
Bangladesh offers an equally exciting proposition with an average annual GDP growth rate of over 6% in the last 5 years and a decline in the poverty rate from 40% in 2005 to 31.5% in 2010. The country is seeing strong export growth boosted by a low manufacturing cost base, which stands at around 15% of that of coastal China. The country’s current growth rate is forecast to continue over the next few years, up until at least 2016, according to the Economist Intelligence Unit.
The DB X-trackers MSCI Pakistan IM TRN Index ETF (XBAK) tracks the performance of large, mid and small capitalisation companies listed on the Karachi, Islamabad and Lahore stock exchanges in Pakistan. The index currently has 25 constituents, including OGDCL, MCB Bank, Fauji Fertilizer, Pakistan Oilfields and United Bank.
The DB X-trackers MSCI Bangladesh IM TRN Index ETF (XBAN) currently tracks the performance of 64 companies, again across the large, mid and small-cap range, listed on the Bangladeshi exchanges, namely the Dhaka Stock Exchange, and the Chittagong Stock Exchange. Major holdings include Square Pharma, Islami Bank Bangladesh, National Bank, Gramenphone and Eastern Bank.
“With the largest number of emerging markets ETFs in Europe, DB X-trackers is coming to be regarded as the ‘go to’ ETF provider for emerging markets exposure. These London listings also demonstrate once again how ETFs are making difficult-to-access markets more investable, with DB X-trackers playing a key role in developing the market,” said Manooj Mistry, head of DB X-trackers for the UK.
DB X-trackers offers 60 emerging markets ETFs covering global, regional, country and sector-specific exposures. This includes the DB X-trackers MSCI Emerging Markets TRN Index ETF, which tracks the performance of global emerging markets and currently has around €2.7 billion in assets under management.
Other DB X-trackers ETFs offer exposure to the equity markets of China, India, Brazil, Mexico, Taiwan, Russia, Indonesia, Thailand, Vietnam, Chile, Korea and Malaysia, while additional regional-focused offerings provide exposure to the BRICs and emerging and frontier Africa.
Both ETFs were initially listed on the Singapore Exchange in September 2011 and are also listed on the Deutsche Börse (Xetra). They are swap-based (fully collateralised) and come with TERs of 0.85%.