Canadian investors looking to broaden their exposure to Asian equities can now do so through two new Asian-focused exchange-traded funds launched earlier this month by WisdomTree Asset Management Canada Inc.
On Aug. 3, WisdomTree Asset Management began trading two new funds on the Toronto Stock Exchange: WisdomTree Japan Equity Index ETF (JAPN) and WisdomTree ICBCCS S&P China 500 Index ETF (CHNA.B).
JAPN is only the second ETF to launch in Canada that focuses on the Japanese market, with the iShares Japan Fundamental Index ETF (CJP) being the other.
With a management fee of 0.51 per cent for units hedged to the Canadian dollar and 0.48 per cent for non-hedged units, JAPN tracks the performance of the WisdomTree Japan Equity Index, which consists of dividend-paying companies incorporated in Japan and traded on the Tokyo Stock Exchange that derive less than 80 per cent of their revenue from sources in Japan. The index is tilted toward companies with a significant global revenue base.
“Japan is a market that has been underowned by investors for decades. However, across developed market economies, it represents a compelling opportunity as the Japanese economy is poised for growth, corporate fundamentals remain strong, valuations are cheap relative to Canada, and the Bank of Japan is likely to remain accommodative,” Jeff Weniger, WisdomTree asset allocation strategist, said in a statement.
Currently, the WisdomTree ICBCCS S&P China 500 Index ETF is only available to investors in non-hedged units with a management fee of 0.55 per cent and is one of the few ETFs in Canada to invest in China A-shares directly.
Earlier this year, Mackenzie Investments launched the Mackenzie China A-Shares CSI 300 Index ETF (QCH) with a management fee of 0.65 per cent. In 2015, Vanguard Investments Canada Inc. added China A-Shares in the Vanguard FTSE Emerging Markets All Cap ETF (VEE).
Onshore Chinese equities, also known as China A-shares, are Chinese-based companies that trade on domestic stock exchanges such as the Shanghai Stock Exchange and the Shenzhen Stock Exchange. These stocks – which became available to select foreign institutions in 2003 – can be difficult for foreign investors to access due to Chinese government regulations.
“We expect to see China’s economy expand further as the government increases integration efforts with global investors,” said Mr. Weniger. “Chinese equities are certainly an area where index-based concepts are in high demand.”
CHNA.B provides investors with exposure to the S&P China 500 Index, which selects the largest 500 eligible companies from the broader S&P Total China BMI Index, representing the entire universe of Chinese companies, including A-Shares and offshore listings that meet certain criteria.
CHNA.B’s underlying index provides significant exposure to mainland China listings, with approximately 48.5 per cent of the index investing in China A-Shares as of June 30.
Other Canadian-listed ETFs with a focus on China include iShares China Index ETF (XCH), the BMO China Equity Index ETF (ZCH) and the Horizons China High Dividend Yield Index ETF (HCN).
Clare O’Hara