DWS has repurposed its one of its China A-Shares ETF to provide access to the landmark MSCI China A Inclusion Index.

As part of the reorganisation, the NYSE Arca-listed Xtrackers CSI 300 China A-Shares Hedged Equity ETF (ASHX US) has dropped the CSI 300 USD Hedged Index, and with it the currency-hedge, and changed its name to Xtrackers MSCI China A Inclusion Equity ETF.

Fiona Bassett, global co-head of passive asset management at DWS

“China is the world’s second largest economy and its equity market has become increasingly accessible for international investors,” said Fiona Bassett, Global Co-Head of Passive Asset Management. “We are always looking for ways to provide clients access to new markets.”

She continued: “DWS was the first to offer ETF clients an investment opportunity to onshore China through our Xtrackers Harvest CSI 300 China A-Shares ETF. Now, with the changed underlying index for ASHX, investors will be able to fine-tune their exposure to Chinese capital markets as MSCI works to introduce more A shares into their Global Standard Indices.”

The new target index is designed to track the progressive partial inclusion of China A shares in the MSCI Emerging Markets Index, which captures large- and mid-cap representation across 24 Emerging Markets (EM) countries.

The A Inclusion index currently has 231 constituents and is most heavily weighted towards financials (33.0%) and consumer staples (12.7%).  

Year-to-date, the MSCI China A inclusion index has underperformed the MSCI China index, returning -6.3% versus 3.7% respectively. However, the A inclusion index has a slightly higher dividend yield than MSCI China, returning 2.1% versus 1.8% (as at 31 May 2018).  

The A inclusion index tracks Chinese A shares that can be accessed through the Stock Connect program.

Stock Connect is a collaboration between the Hong Kong, Shanghai and Shenzhen Stock Exchanges that allows international and mainland Chinese investors to trade securities in each other’s markets through the trading and clearing facilities of their home exchange.

The index is reviewed quarterly with the objective of reflecting change in the underlying equity markets in a timely manner, while limiting undue index turnover. During the May and November semi-annual index reviews, the index is rebalanced and the large- and mid-capitalisation cutoff points are recalculated.

The gross and net expense ratio for ASHX has been reduced to 60bps from 135bps gross and 70bps net expense ratios. This means that the fund is the most cost-effective pure China A-shares exposure ETF in the US ETF market. In addition, the net expense ratio for Xtrackers MSCI All China Equity ETF (CN US) was reduced from 62bps to 50bps.