WisdomTree adds A-Share exposure to EM and China ETFs

Aug 11th, 2017 | By | Category: Equities

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WisdomTree has announced it is adding China A Share exposure to two of its ETFs, the WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (NYSE Arca: XSOE) and the WisdomTree China ex-State-Owned Enterprises Fund (Nasdaq: CXSE). The funds underlying indices will make the changes following a special rebalance scheduled to occur after the close of business on 11 August 2017.

WisdomTree adds A-Share exposure to emerging market and China ETFs

XSOE and CXSE will have China A-Shares added to their underlying indices after the close of business on 11 August 2017.

Jeremy Schwartz, WisdomTree director of research, commented: “Over the past year, WisdomTree has been evaluating the opportunity to add China A shares to our proprietary indices. Given the continued openness of the Chinese domestic stock market to foreign investors, we are operationally ready to implement this change. The addition of China A shares to these indices will provide investors with a more complete, diversified exposure to China.”

The underlying indices tracked by CXSE and XSOE will add the 50 largest companies by float-adjusted market capitalization that meet the index requirements. The A share exposure will be capped at 25% for CXSE and 5% for XSOE.

XSOE tracks the WisdomTree Emerging Markets ex-State-Owned Enterprises Index while CXSE tracks the WisdomTree China ex-State-Owned Enterprises Index. Both indices cover broad market exposures while excluding firms with significant government control (defined as greater than 20% share ownership).

WisdomTree believes the exclusion of state-owned enterprises is beneficial to investors by allowing them to be more exposed to opportunities resulting from China’s economic shift toward consumption and services.

“Rather than overexposing investors to energy and state-run banking sectors which are dominated by state-owned enterprises, CXSE is significantly allocated toward consumer discretionary and technology sectors,” said Schwartz. “The strong performance of CXSE and XSOE, which has a broader strategy, has been driven by this exposure to growth-oriented and consumer-centric companies. We believe the addition of China A shares will further enhance these strategies by allowing for access to new securities as well as a more complete exposure to the market.”

In June, WisdomTree implemented fee waivers for both CXSE and XSOE, reducing the expense ratios for both funds to 0.32%.

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