Industry Updates

Franklin Templeton races headlong into country ETFs

David Tuckwell

Today's ETF listings


Franklin Templeton lists more than a score of country ETFs

In a sign of the times, traditionally active mutual fund manager Franklin Templeton is listing more than a dozen ETFs in New York, tracking a suite of FTSE country indexes. They are:

  • Franklin FTSE Australia ETF FLAU

  • Franklin FTSE Brazil ETF FLBR

  • Franklin FTSE Canada ETF FLCA

  • Franklin FTSE China ETF FLCH

  • Franklin FTSE France ETF FLFR

  • Franklin FTSE Germany ETF FLGR

  • Franklin FTSE Hong Kong ETF FLHK

  • Franklin FTSE India ETF*

  • Franklin FTSE Italy ETF FLIY

  • Franklin FTSE Japan ETF FLJP

  • Franklin FTSE Russia ETF*

  • Franklin FTSE South Korea ETF FLKR

  • Franklin FTSE Switzerland ETF*

  • Franklin FTSE Mexico ETF FLMX

  • Franklin FTSE Taiwan ETF FLTW

  • Franklin FTSE United Kingdom ETF FLGB

  • Franklin FTSE Asia ex Japan ETF*

  • Franklin FTSE Europe ETF FLEE

  • Franklin FTSE Europe Hedged ETF FLEH

  • Franklin FTSE Japan Hedged ETF FLJH

The ETFs are fairly self-explanatory. They track the largest companies in each country by market capitalisation. Thus FLAU tracks the largest Australian companies by market cap, and so on. The two hedged ETFs - FLEH and FLJH - track the biggest European and Japanese companies but hedge for movements between the euro and the dollar, and the yen and the dollar.

*The marked ETFs are included within the prospectus but have yet to have a listing date finalised. They could, in theory, never be listed. And, in fairness to Franklin Templeton, listing Russian, Indian and Asia ex-Japan ETFs is difficult.

South AfricaThree more ETFs for J-burg South African issuer Sygnia is listing two new plain vanilla ETFs and one property ETF on the Johannesburg Stock Exchange. They are:

  • Sygnia Itrix Global Property ETF (SYGP)

  • Sygnia Itrix S&P 500 ETF (SYG500)

  • Sygnia Itrix Swix 40 ETF (SYGSW4)

The index each tracks is fairly well-known. SYGP tracks the S&P Global Property 40 index, which provides exposure to 40 leading global property companies. The SYG500 tracks the S&P. And the SYGSW4 tracks the SWIX 40, an index of the biggest companies in South African by market capitalization.

Analysis It will be very interesting to see how these ETFs perform, for two reasons. First, the African ETF market is valued at around $7bn (small by western standards) and revolves around South Africa. Other sub-Saharan African countries, to the extent they have any ETFs at all, get theirs from South Africa through cross-listings or from South African financial institutions making the trip over. This makes South African listings exciting because if they succeed at home they can be transported elsewhere.

The second reason is the issuer involved. Sygnia gained attention this year for its acquisition of db x-trackers South African arm. As well as broadening its products suite, the db x acquisition allows Sygnia to reduce its dependency on BlackRock, which has provided it with its international ETFs. This listing and issuer, therefore, offer a rare example of a local competitor taking back market share from major global issuers.

ItalySource joins PIR tax party Invesco-owned Source is listing a new ETF in Milan that gives exposure to Italian small-cap companies, the Source STOXX Europe Small 200 UCITS ETF (SDJSML).

Source's reasons for listing SDJSML - and the benefits of doing so - is the PIR tax, which became active in Italy this year. The PIR tax gives funds that stay invested long-term in Italian small and medium-sized companies a total income and capital gains tax exemption. It was designed to incentivise local investment. Whether or not it succeeds in doing so remains to be seen, but it has certainly incentivised a lot of ETF creation. Lyxor, BlackRock and Amundi have all rolled out ETFs designed to collect PIR money this year.

GermanyUBS lists inflation proof bond ETFs on Xetra Swiss banking giant UBS is listing two inflation-proof bond ETFs and one emerging markets bond ETF in Germany. They are:

  • UBS ETF - Bloomberg Barclays Euro Inflation Linked 1-10 UCITS ETF (FRC3)

  • UBS ETF - Bloomberg Barclays Euro Inflation Linked 10+ UCITS ETF (FRC4)

  • UBS ETF - J.P. Morgan USD EM Diversified Bond 1-5 UCITS ETF (SEAA)

FRC3 will track an index of euro-denominated, investment-grade, government inflation-linked debt with between 1 to 10 years maturity. FRC4 will do the same but for longer-term bonds. SEAA will track a diverse basket of dollar-denominated emerging market bonds with 1 to 5 years to maturity.

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