WisdomTree Canada launches Japan and China equity ETFs

Aug 7th, 2018 | By | Category: Equities

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WisdomTree Canada has launched a pair of Asia-focused ETFs on Toronto Stock Exchange.

WisdomTree Canada Japan and China equity ETFs

The two new funds provide exposure to Japanese and Chinese equities.

The first provides exposure to dividend-paying equities listed in Japan. The second provides access to the broad Chinese equities.

Japan

The WisdomTree Japan Equity Index ETF (JAPN CN) tracks an in-house index that covers dividend-paying stocks traded on the Tokyo Stock Exchange from companies that derive less than 80% of their revenue the Japanese market.

WisdomTree maintains that by excluding companies that derive 80% or more of their revenue from Japan, the index is tilted towards companies with a more significant global revenue base.

“Japan is a market that has been under-owned by investors for decades,” said Jeff Weniger, WisdomTree Asset Allocation Strategist. “However, across developed market economies, it represents a compelling opportunity as the Japanese economy is poised for growth, corporate fundamentals remain strong, valuations are cheap relative to Canada, and the Bank of Japan is likely to remain accommodative.”

The index currently has 463 constituents and a dividend yield of 2.2%. Its largest sector exposures are consumer discretionary (24.5%), industrials (20.3%), information technology (13.5%) and financials (13.2%).

JAPN utilizes currency hedging between the yen and the Canadian dollar, although investors wishing to take on currency risk may access an unhedged share class through the ticker JAPN.B CN. The management expense ratio (MER) is 0.51% for hedged units and 0.48% for non-hedged units.

The strategy is also available in the US, through the WisdomTree Japan Hedged Equity Fund (DXJ US), as well as in Europe. DXJ has assets under management of $5.8 billion and charges an expense ratio of 0.48%. Currency exposure between the yen and US dollar is hedged.

In Europe, investors may choose between non-hedged exposure or currency hedging relative to the US dollar, pound sterling, euro, or Swiss franc. The currency-hedged share classes come with total expense ratios (TERs) of 0.45%, while unhedged costs 0.40%.

China

The WisdomTree ICBCCS S&P China 500 Index ETF (CHNA.B CN) tracks the S&P China 500 Index CAD. The index selects the largest 500 eligible companies from the broader S&P Total China BMI Index, representing the entire universe of Chinese companies including A-Shares and offshore listings.

Approximately 48.5% of the index covers China A-Shares as of 30 June 2018.

The ETF uses a rules-based stock selection process to target the sector weights that are representative of the broad universe of Chinese equities. Constituents are weighted by market capitalization. The largest sector exposures are to financials (24.5%), information technology (22.5%), consumer discretionary (10.3%), industrials (9.7%) and materials (7.0%).

The largest holdings in the fund are Tencent Holdings (9.1%), Alibaba (7.7%), China Construction Bank (3.8%) and Ping An Insurance (3.1%).

“The WisdomTree ICBCCS S&P China 500 Index ETF provides investors with the opportunity to efficiently access diverse sectors in one of the largest and fastest-growing economies in the world,” said Weniger. “We expect to see China’s economy expand further as the government increases integration efforts with global investors. Chinese equities are certainly an area where index-based concepts are in high demand.”

The MER of the fund is 0.55%.

The strategy is also available in the US and Europe through locally listed ETFs. The US-listed fund has AUM of around $11 million and comes with an expense ratio of 0.55%. The Europe-listed fund has around $18m in AUM but is distinctly more expensive with a TER of 0.75%.

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