WisdomTree Investments (NASDAQ:
) will throw its hat in the China ETF ring on Wednesday, September
19 when it introduces the WisdomTree China Dividend Ex-Financials
Fund. The new ETF will trade on the Nasdaq under the ticker "CHXF."
There are currently
almost 230 ETFs offering exposure to China
, the world's second-largest economy.
CHXF, which will charge 0.63 percent per year, will hold
China-based companies that trade in Hong Kong. The new ETF will be
a stark departure from the iShares FTSE China 25 Index Fund (NYSE:
), the largest China ETF. FXI, with $4.5 billion in assets under
management, is often criticized for its excessive weight to
financial services stocks. The sector accounts for over 52 percent
of FXI's weight, prompting some critics to assert FXI is not
representative of China's diverse economy.
There is something to be said of the ex-financials approach.
"An equal-weighted blend of the non-financial sector indexes in
China, "China ex-Financials," had an average annual standard
deviation of about 2 percentage points less than the MSCI China
Index and 10 percentage points less than the MSCI China Financials
Sector Index over the 10 years from June 30, 2002, through June 30,
2012," WisdomTree Research Director Jeremy Schwartz wrote in a
CHXF will track the WisdomTree China ex-Financials Dividend
Index, which weights constituents based on annual dividends
"Companies that pay higher dividends and meet specified
liquidity6 and other criteria generally have a higher weight in the
Index. At the time of the Index's annual rebalance, the maximum
weight of any security in the Index is capped at 10% and the
maximum weight of any one sector in the Index is capped at 25%. In
response to market conditions, security weights may fluctuate above
10% and sector weights may fluctuate above 25% between annual Index
according to WisdomTree
WisdomTree is no stranger to the ex-financials ETF theme. The
firm's WisdomTree Dividend ex-Financials Fund (NYSE:
) has almost $1.3 billion in assets under management. The
WisdomTree International Dividend ex-Financials Fund (NYSE:
) has $353.6 million in AUM.
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