Mirae Asset Global Investments has launched a new ETF in Hong Kong under its Global X brand, providing high-income exposure to stocks listed in the Asia Pacific region.

Jung Ho Rhee, CEO of Mirae Asset Global Investments (Hong Kong).

The Global X Asia Pacific High Dividend Yield ETF (3116 HK) has been listed on the Stock Exchange of Hong Kong and comes with ongoing charges of 0.68%.

According to Mirae Asset, the fund may appeal to yield-hungry investors who are looking beyond traditional fixed income investments as central banks continue to tighten monetary policy in a bid to control inflation.

High-yielding stocks are often thought to face headwinds in a rising yield environment as competition for investors’ capital intensifies; however, Mirae Asset notes that in Asia these stocks have historically exhibited the potential not only to deliver high levels of income but to outperform broad market indices.

Over the previous three periods of rising yields, the ETF’s underlying reference – the Solactive Asia Pacific High Dividend Yield Index – outperformed the MSCI AC Asia Pacific Index by 7.3% on a cumulative basis. In terms of dividend yield, the index delivered 8.0%, as of 30 June 2022, which is more than double the 3.2% offered by Hong Kong’s Hang Seng Index.

Jung Ho Rhee, CEO of Mirae Asset Global Investments (Hong Kong), said: “The Asia Pacific region has consistently offered the highest levels of dividend yields compared to other regions around the world, driven by the strong fundamentals and healthy cash balances of its corporates. The Global X Asia Pacific High Dividend Yield ETF aims to tap into the vast income opportunity presented by this region at a time when investors urgently need to protect their portfolios against rising inflation.”

Methodology

The Solactive Asia Pacific High Dividend Yield Index selects its constituents from a universe of stocks listed in Australia, Hong Kong, Japan, New Zealand, Singapore, South Korea, and Taiwan. Eligible companies must have minimum market capitalizations of HKD 2.5 billion (approx. $320 million) and average daily trading volumes above HKD 70m ($9.2m).

The universe of eligible securities is then ranked according to their estimated one-year forward dividend yields. To avoid potential dividend traps – companies with high but unsustainable dividend yields that subsequently reduce or scrap their payments – any firm with an estimated dividend yield above 20% is removed from the selection pool.

The index includes the 40 highest-ranked securities. Reconstitution happens on a quarterly basis with existing index members only being removed if they fall out of the top 75 highest-ranked securities.

Constituents in the index are equally weighted while ensuring that the combined weight of stocks from any single country or sector does not exceed 35%.

As of the end of July, stocks from Taiwan and Australia each account for around 30% of the index weight with Japan and South Korea each making up an additional 14%.

Distributions are made from the ETF on a quarterly basis.