WisdomTree to Enter China ETF Fray With Ex-Financials Fund
WisdomTree Investments (NASDAQ: WETF) will throw its hat in the China ETF ring on Wednesday September 19 when it introduces the WisdomTree China Dividend Ex-Financials Fund. The new ETF will trade on the Nasdaq under the ticker “CHXF.” There are currently almost 230 ETFs offering exposure to China, the world’s second-largest economy.
CHXF, which will charge 0.63 percent per year, will hold China-based companies that trade in Hong Kong. The new ETF will be a stark departure from the iShares FTSE China 25 Index Fund (NYSE: FXI), the largest China ETF. FXI, with $4.5 billion in assets under management, is often criticized for its excessive weight to financial services stocks. The sector accounts for over 52 percent of FXI’s weight, prompting some critics to assert FXI is not representative of China’s diverse economy.
There is something to be said of the ex-financials approach.
“An equal-weighted blend of the non-financial sector indexes in China, “China ex-Financials,” had an average annual standard deviation of about 2 percentage points less than the MSCI China Index and 10 percentage points less than the MSCI China Financials Sector Index over the 10 years from June 30, 2002, through June 30, 2012,” WisdomTree Research Director Jeremy Schwartz wrote in a note.
CHXF will track the WisdomTree China ex-Financials Dividend Index, which weights constituents based on annual dividends paid.
“Companies that pay higher dividends and meet specified liquidity6 and other criteria generally have a higher weight in the Index. At the time of the Index’s annual rebalance, the maximum weight of any security in the Index is capped at 10% and the maximum weight of any one sector in the Index is capped at 25%. In response to market conditions, security weights may fluctuate above 10% and sector weights may fluctuate above 25% between annual Index rebalance dates,” according to WisdomTree.
WisdomTree is no stranger to the ex-financials ETF theme. The firm’s WisdomTree Dividend ex-Financials Fund (NYSE: DTN) has almost $1.3 billion in assets under management. The WisdomTree International Dividend ex-Financials Fund (NYSE: DOO) has $353.6 million in AUM.
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