Deutsche Bank listed two new exchange-traded funds in Singapore yesterday that are firsts for the region, one linked to Asian high-yield stocks and the other to Philippines’ equities.
Overall the bank now has 43 ETFs listed in Singapore, and Marco Montanari, its head of db X-trackers in Asia, confirms that the firm wants to reach 50 before the end of this year.
Deutsche launched its high-dividend subset of the MSCI All-Country Asia Ex-Japan Index to appeal to institutional investors in the ongoing low interest-rate environment. The product is Ucits III compliant and the bank plans to list it in Germany and London in the next month.
“In the Asia region you have many asset managers and private banking discretionary managers who have MSCI Asia ex-Japan as a benchmark and are trying to find ways to beat it,” notes Montanari. “We received queries from private banking entities that were looking for such a product.
“We gave priority to listing in Singapore because it has Asian underlyings and it is more convenient to trade in Asia because you can trade while the underlying markets are open. We are convinced it will also attract volume in Singapore coming from Europe.”
The Deutsche high-dividend ETF is a US dollar denominated offering consisting of 164 constituent stocks in 10 countries and an all-in fee of 0.65%. It features only securities with a dividend yield at least 30% higher than that of the parent index. Its average dividend yield is 3.75%, compared with 2.17% for the parent index.
Only securities with a reasonable payout and a non-negative five-year dividend per share growth rate are eligible for inclusion. Rebalancing is quarterly.
It has a 26% weighting to banks, followed by telecoms and energy; country allocation sees a 32% weighting to China, followed by Taiwan, Hong Kong and Singapore. But it only has a small exposure to South Korea, which contrastingly has the highest weighting in the parent index.
Deutsche Bank research shows that the MSCI Asia ex-Japan High Dividend Yield Index would have returned 130.5% over the past three years, compared with 99.9% for the parent index.
Montanari says the firm focused on Asia ex-Japan because the MSCI Asia-Pacific Index had such a high weighting for Australia, and because it had requests for an Asian product.
As for its Philippines ETF product, Montanari says this was not launched to time the market but rather to round out the bank’s regional ETF offering.
“We are seeing more requests for frontier markets and those that are difficult to get exposure to,” he notes. “We also saw there was nothing linked to the Philippines, you don’t even have an ETF market in the Philippines, so this is really a first in Asia.”
Its MSCI Philippines Investable Market Index reflects the performance of large-, mid- and small-cap companies. It, too, is Ucits III compliant, denominated in US dollars and has an all-in fee of 0.65%. It has 28 constituents with the following sector weightings: banks (19.3%), utilities (19%), real estate (18.5%), capital goods (15.6%) and telecom services (12.4%).
Montanari says he expects this product to appeal more to private banking and hedge fund managers.