Deutsche Asset & Wealth Management (Deutsche AWM) has launched a physical replication exchange-traded fund (ETF) tracking the JPX-Nikkei 400 Index of Japanese stocks. At the same time, three new currency-hedged share classes of existing db X-trackers ETFs have also been listed…..
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Michael Mohr, Deutsche AWM’s head of exchange-traded product development, EMEA
db x-trackers JPX-Nikkei 400 UCITS ETF (DR)1 tracks an index of 400 Japanese stocks selected on the basis of quantitative and qualitative screening. As the underlying index is not a standard capitalisation-weighted benchmark the ETF falls into the strategic beta – also known as ‘smart beta’ – category of investments.
The starting point for selection is the stocks on the Tokyo Stock Exchange that have been listed for three years and are not about to be de-listed. The top 1000 stocks are then selected based on trading volume over the last three years and market capitalisation. A quantitative scoring assessment is then done based on three-year average return on equity (top 40% ranking), three-year cumulative operating profit (top 40% ranking) and market value (top 20% ranking). Finally, a qualitative filter is applied for relevant corporate governance and disclosure levels. The 400 stocks are then selected in descending order of highest overall score, with a weighting cap of 1.5%.
The ETF has been listed on the London Stock Exchange (LSE) as a GBP-hedged share class and on the Deutsche Börse in unhedged and EUR-hedged share classes. The currency-unhedged share class has an annual all-in fee of 0.2% per annum, while the currency-hedged share classes have annual all-in fees of 0.3% per annum.
“The JPX-Nikkei 400 Index is a sophisticated strategic beta index that aims to provide investors with exposure to quality Japanese stocks. The index is much in demand, and with annual all-in fees of 0.2% per annum for currency-unhedged exposure and 0.3% per annum for currency-hedged exposure, we expect the ETF to be very popular,” said Michael Mohr, Deutsche AWM’s head of exchange-traded product development, EMEA.
Also newly listed on the LSE are GBP-hedged and USD-hedged share classes tracking the db x-trackers MSCI EMU Index UCITS ETF (DR), and a USD-hedged share class of the db X-trackers MSCI Europe Index UCITS ETF (DR).
Mohr added, “The introduction of quantitative easing in the Eurozone has boosted returns on European equities, but it’s also weakened the euro against major currencies, which dilutes the returns for non-euro investors. These share classes potentially solve that issue, mitigating the currency risk, and so should strike a chord with UK investors.”
Meanwhile, the db x-trackers MSCI GCC Select Index UCITS ETF1,2, which provides exposure to the equity markets of the Gulf Cooperation Council countries, including Saudi Arabia, has also been listed on the LSE, following an initial listing in Germany in February.