DWS unveils local currency EM sovereign bond ETF

May 9th, 2023 | By | Category: Fixed Income

DWS has launched a new fixed income ETF in Europe providing exposure to local currency bonds issued by emerging market sovereigns.

DWS unveils local currency EM sovereign bond ETF

DWS has introduced Europe’s cheapest local currency emerging markets sovereign bond ETF.

The Xtrackers JP Morgan EM Local Government Bond UCITS ETF has been listed on London Stock Exchange in US dollars (XEML LN) and pound sterling (XEMP LN) as well as on Deutsche Börse Xetra in euros (XEML GY).

With an expense ratio of just 0.25%, the fund is the cheapest local currency emerging markets government bond ETF in Europe, five basis points cheaper than the $120 million VanEck JP Morgan EM Local Currency Bond UCITS ETF (EMLC LN) and half the price of the $4.8 billion iShares JP Morgan EM Local Govt Bond UCITS ETF (SEML LN).


The fund is linked to the JP Morgan Government Bond Index-Emerging Markets Global Div 10% Cap 0.25% Floor Index which consists of fixed-rate debt instruments that may be rated either investment-grade or high yield.

Eligible issues must have remaining maturities greater than 2.5 years to enter the index where they will stay until six months prior to the bond’s termination.

Index provider JP Morgan classifies a country as an emerging market if its Gross National Income (GNI) per capita is below a specific income ceiling in any given year, and if its Purchasing Power Parity (PPP) Index ratio (((GDP at current prices in USD)/(GDP in current prices at PPP dollars)) * 100) falls below a certain threshold for at least three consecutive years. A country loses its emerging markets status if its GNI per capita or PPP Index ratio rises above these ceilings.

Countries that currently meet the criteria for emerging markets status include China, Indonesia, Malaysia, Thailand, Czech Republic, Hungary, Poland, Romania, Turkey, Brazil, Chile, Colombia, Mexico, Peru, Egypt, and South Africa.

Constituents in the index are weighted by market value outstanding subject to a country cap of just 10%, a move that aims to provide a more even distribution of weights across the countries in the index compared to other mainstream emerging market bond benchmarks.

The index is rebalanced on a monthly basis.

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