Industry Updates

DWS to exclude China from emerging markets ESG ETF

Total expense ratio will be reduced from 0.18% to 0.16%

Lauren Gibbons

China behind bars ex China ETFs

DWS is set to switch the index on its emerging market ESG ETF to one that excludes Chinese equities.

In a shareholder notice, the asset manager said the Xtrackers MSCI Emerging Markets ESG Screened UCITS ETF (XDEG) will go from tracking the MSCI EM Select ESG Screened index to the MSCI Emerging Markets ex-China index.

As a result, the name of the ETF will change to the Xtrackers MSCI Emerging Markets ex China UCITS ETF and the total expense ratio (TER) will be reduced from 0.18% to 0.16%.

DWS did not say the reasons behind the move, but China has experienced waning investor demand in recent months while excluding Chinese equities also helps investors to manage their exposure to the market.

The ETF will go from its three largest country weightings being China (27.1%), Taiwan (19.5%) and India (17.3%) to the top three country weightings being India (24.8%), Taiwan (24.8%) and South Korea (15.8%).

The changes are subject to shareholder approval, and if approved, will take effect on 31 July.

DWS joins Franklin Templeton, UBS, Lyxor, Amundi and BlackRock in offering emerging market strategies that exclude China.

Demand for emerging market ex-China ETFs has been driven by fund selectors looking to strip out exposure to the world's second-largest economy due to “idiosyncratic risks” and dismal returns over the last few years.

Despite this, China has shown some recovery in recent months, with China tech ETFs being the top performers in May following low valuations and robust financials of China’s largest companies.

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