Deutsche introduces world’s first dedicated USD Asia ex-Japan corporate bond ETF

Sep 12th, 2016 | By | Category: Fixed Income

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Deutsche Asset Management, Europe’s second largest provider of exchange-traded funds, has launched the world’s first ETF delivering dedicated exposure to the Asia ex-Japan US dollar corporate bond market.

Deutsche Asset Management is part of the Deutsche Bank Group.

Deutsche Asset Management is part of the Deutsche Bank Group.

Debuting on Deutsche Börse Xetra, the db x-trackers II iBoxx USD Liquid Asia Ex-Japan Corporate Bond UCITS ETF (Xetra: ALQD) provides European investors with easy access to a rapidly growing market that has expanded by over 24% per annum over the past five years.

Anson Chow, Deutsche AM’s Head of ETF product development, Asia Pacific, commented: “Asia US dollar investment-grade corporate bond issuance increased from around $21bn in 2010 to around $63bn in 2015. This is an important and growing section of the global bond market, and this new ETF provides investors with a flexible and efficient way to access such exposure.”

He added: “It’s interesting to observe that over the past three years the Asia investment-grade corporate bond market has generally shown a higher volatility-adjusted return compared to the US investment grade corporate universe. And that in the past 10 years there have been no defaults in the bonds included in the index underlying this ETF.”

The ETF is physically replicated and tracks the Markit iBoxx USD Liquid Asia Ex-Japan Corporates Large Cap Investment Grade Index, an index designed to represent the performance of tradable debt issued in US dollars by companies based in Asia (excluding Japan).

Only bonds having a minimum outstanding amount of $750 million and a minimum time to maturity of at least 1.5 years are eligible for inclusion.

The index currently comprises 148 investment-grade corporate bonds from nine countries. Chinese bonds represent the highest weighting in the index, at almost 60%, while bonds from Hong Kong and India both have weightings of more than 10%. This is consistent with Greater China and India representing over 70% of the GDP of the Asia ex-Japan region. Corporate bonds from Malaysia, Indonesia, Singapore, Thailand, South Korea and Taiwan make up the remaining 20% of the index.

As of 31 August 2016, the index had a yield of 3.10%, an average duration of 5.03 years, and average credit quality of ‘A-’.

The ETF has a total expense ratio of 0.30%.

As well as the Xetra listing, the fund is scheduled to list on the London Stock Exchange in the coming days.

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