WisdomTree lists emerging Asia equity income smart beta ETF

Oct 13th, 2015 | By | Category: Equities

WisdomTree Europe, a provider of exchange-traded funds, has introduced an emerging Asia equity income ETF, providing investors with access to the yield opportunities of companies in the region.

WisdomTree lists emerging Asia equity income smart beta ETF

Hector McNeil, Co-CEO of WisdomTree Europe.

The WisdomTree Europe Emerging Asia Equity Income UCITS ETF (DEMA LN) offers exposure to a diversified basket of emerging Asia dividend-yielding stocks and follows a smart beta portfolio construction process that weights constituents by cash dividends.

Hector McNeil, Co-CEO of WisdomTree Europe, commented: “WisdomTree Europe is delighted to launch the WisdomTree Emerging Asia Equity Income UCITS ETF. This new ETF is Europe’s first dividend-focused ETF covering emerging Asian equity markets. WisdomTree’s methodology combines experience and track record, with a high yielding diversified index thereby combining an attractive yield with exposure to one of the key regions within emerging markets.”

According to WisdomTree, dividends are a major factor in determining stock price and a useful measure in determining company profitability and value, rather than stock price alone. Academic research shows that indices weighted by dividends, or which include higher yielding companies, have tended to outperform market capitalisation indices over the long-term.

The fund tracks WisdomTree’s internally developed index which begins by selecting the top 30% of emerging Asia domiciled companies ranked by dividend yield. The index then weights constituents by their total cash dividend relative to the sum of all dividends in the selected universe. Tracking a dividend-weighted index offers the potential for better risk-adjusted returns relative to traditional market cap-weighted benchmarks and diversification benefits to a portfolio when held alongside market cap-weighted assets.

“The ETF provides a balanced exposure to the highest yielding companies in the region. It has over 300 constituents and features a mid- to small-cap bias with close to 62.5% of the index comprised of stocks with a market capitalisation below $10bn,” said Viktor Nossek, Director of Research at WisdomTree Europe.”The strategy has a large allocation to high dividend yielding countries like China and Taiwan whilst underweighting low dividend countries such as India and South Korea. At a sector level it is overweight financials and defensives such as telecoms, energy and utilities.”

A 4.5% single stock cap, a 33.3% sector cap and a 33.3% country cap are employed to ensure that the basket of stocks is not overly concentrated in single companies, sectors or countries. “The capping of individual sector and country exposures creates a balanced portfolio, providing risk control at different parts of the investment cycle. The low price-to-book and price-to-earnings ratios are a reflection of how the index aims to capture value stocks whilst the historic dividend yield of 6.1% (as of 9 September 2015) compares favourably to competing indices.”

The fund carries a 0.54% total expense ratio and has been listed on the London Stock Exchange. This is the third emerging market equity ETF available from WisdomTree Europe, joining the WisdomTree Emerging Market Equity Income UCITS ETF (DEM LN) and the WisdomTree Emerging Market SmallCap Dividend UCITS ETF (DGSE LN).

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