New Listing

DWS unveils synthetic China A-Shares ESG ETF

XCNA becomes DWS’s second China ETF in two months

Jamie Gordon

Statue of bull after the Shenzen Exchange in China

DWS has launched a synthetic ETF capturing onshore Chinese equities listed in Shenzhen and Shanghai with an ESG overlay.

The Xtrackers MSCI China A ESG Screened Swap UCITS ETF (XCNA) is listed on the Deutsche Boerse and Boerse Frankfurt with a total expense ratio (TER) of 0.29%.

XCNA synthetically replicates the MSCI China A Inclusion Select ESG Screened index which currently offers exposure to 371 companies.

Synthetic ETFs do not own the underlying securities of the index and instead, enter into a swap agreement with a counterparty that is obliged to provide the return of the index minus fees.

In some markets, this means synthetic ETFs can track their underlying index more accurately than physical ETFs which are beholden to swings in tracking error, however, there is counterparty risk involved.

The index is calculated in the offshore RMB exchange rate and aims to track the progressive partial inclusion of A-Shares in the MSCI Emerging Markets index. 

Like its parent index, it is designed for global investors accessing mainland China listings through the Stock Connect system.

It excludes companies associated with tobacco and conventional, controversial, civilian and nuclear weapons that are assigned an MSCI ESG Rating of ‘CCC’, those deriving revenues from thermal coal or oil sand extraction and companies that violate the United Nations Global Compact principles.

DWS has been active in its emerging markets range recently. In April, the German asset manager launched the Xtrackers Harvest MSCI China Tech 100 UCITS ETF (XCTE) as well as switching two of its Asia ETFs to ESG benchmarks in May.

The two switches and yesterday's launch are signs the firm is standing by its ESG roll-out despite being at the receiving end of greenwashing allegations. This came to a head earlier this month as 50 police and regulator personnel raided the DWS headquarters and its CEO, Asoka Woehrmann, stepped down.

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