DWS has expanded its European ETF range with a new fund that provides access to the mid and small-cap segments of China’s onshore equity market.
Chinese mid- and small-cap stocks offer significant growth potential.
The Xtrackers CSI500 Swap UCITS ETF (XCSI) has been listed on London Stock Exchange and Deutsche Börse Xetra with an expense ratio of 0.35%.
The fund is linked to the CSI 500 Index which reflects the market cap-weighted performance of 500 companies listed on the Shanghai Stock Exchange and the Shenzhen Stock Exchange. It covers the largest eligible firms after excluding the constituents of the large-cap CSI 300 – the top-ranked 300 securities of the universe.
Notably, the CSI 500 Index is broadly diversified, with the ten largest companies comprising just 6% of the index. The industrial sector represents nearly a quarter of the index, followed by basic materials (16%) and information technology (13%).
The ETF uses synthetic replication, where the index return is provided by a swap counterparty.
Chinese mid and small-cap stocks offer significant growth potential and diversification benefits. These companies are often in expansion phases and may benefit from government support in strategic sectors such as technology and green energy. Additionally, they can provide attractive valuation opportunities compared to their large-cap counterparts.
However, these investments come with heightened risks, including market volatility, regulatory uncertainty, and liquidity concerns. The Chinese regulatory environment can be unpredictable, and mid and small-cap stocks may be more vulnerable to economic slowdowns and geopolitical tensions.
With this new fund, DWS now offers a total of nine ETFs focused on the Chinese equity market with over $2.5 billion in collective AUM.
Simon Klein, Global Head of Xtrackers Sales at DWS, commented: “The management of China as an investment region in its own right is becoming increasingly important. We are observing that investors are placing a stronger focus on the question of what role China should play in the portfolio, as well as on which indices best reflect the Chinese market.”