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WisdomTree Adds A-Shares To 2 China ETFs

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WisdomTree Adds A-Shares To 2 China ETFs
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WisdomTree Investments Inc. (NASDAQ: WETF) said Tuesday it's adding China A-shares to a pair of its emerging markets exchange-traded funds.

The WisdomTree China ex-State-Owned Enterprises Fund (NASDAQ: CXSE) and the WisdomTree Emerging Markets ex-State-Owned Enterprises Fund (NYSE: XSOE) “will add exposure to China A shares in seeking to track their underlying indexes in relation to a special index rebalance scheduled to occur after the close of business on August 11, 2017,” according to a statement issued by New York-based WisdomTree.

A-shares are the Chinese stocks trading on the country's mainland exchanges in Shanghai and Shenzhen. Earlier this year, index provider MSCI Inc. (NYSE: MSCI) said it's elevating A-shares to its international indexes, including the popular MSCI Emerging Markets Index.

What's Being Added

When MSCI announced its inclusion of A-shares, that news pertained to more than 200 companies trading on mainland China. In the case of the A-shares additions to the WisdomTree ETFs, 50 of the biggest A-shares names will be added to the indexes CXSE and XSOE track.

“The underlying indexes tracked by CXSE and XSOE will add the 50 largest companies by float adjusted market capitalization that meet the index requirements,” said WisdomTree. “The A share exposure will be capped at 25% for the WisdomTree China ex-State-Owned Enterprises Index and 5% for the WisdomTree Emerging Markets ex-State-Owned Enterprises Index.”

CXSE tracks the WisdomTree China ex-State-Owned Enterprises Index. By eliminating exposure to state-controlled companies, CXSE features larger weights to sectors with fast-growing companies as highlighted by a more than 60 percent combined weight to Chinese technology and consumer discretionary companies. CXSE is up 51.6 percent year-to-date.

What About XSOE

The WisdomTree Emerging Markets ex-State-Owned Enterprises Fund tracks the WisdomTree Emerging Markets ex-State-Owned Enterprises Index, which, as its name implies, excludes state-controlled companies.

XSOE allocates nearly 29 percent of its weight to Chinese stocks with technology and consumer discretionary names representing the ETF's largest and third-largest sector weights. XSOE is up nearly 35 percent year-to-date compared to a gain of 26.4 percent for the MSCI Emerging Markets Index.

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