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Analyse: HSBC MSCI Emerging Markets UCITS ETF

Bewertungsorientierte Investoren finden heute die günstigsten Märkte in den Schwellenländern. Dem Risiko stehen die Chancen eines antizyklischen Einstiegs gegenüber. 

Rolle im Portfolio

The HSBC MSCI Emerging Markets ETF provides exposure to a wide array of mid- and large-cap companies within the world’s emerging regions. The importance of thisbroad category of countries has increased significantlyon the global political and economic stage in recent years. Whereas a fund withemerging market exposure would once have been considered a speculative tactical tool, it is increasingly becoming a core component of a globally balanced portfolio. Nevertheless, this can be a volatile area of the market. The MSCI Emerging Markets Index has had an average annual standard deviation of 18.5% over the past 10 years, versus 14.1% for the MSCI World Index. Its correlation to other equity exposures does suggest benefit as a diversifier. Over the same period it has shown correlation to the local-currency returns of the S&P 500, the MSCI Europe, and the broader MSCI World Index of 77%, 80% and 83%, respectively. That benefit has only increased recently, with corresponding one-year correlations of 47%, 75% and 63%. The fund passes along dividends from underlying securities in a quarterly distribution and currently yields 1.94% per year. Therefore this fund might suit an investor seeking a steady but modest level of income, although the tax implications of such distributions for each individual investor should be taken into consideration.

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Fundamentale Analyse

While economic growth in the developed world remains lacklustre despite rock-bottom interest rates, much of the developing world has maintained strong growth rates over the last few years. As the group’s largest economy-- and the largest weighting in the index-- China has a considerable impact on the MSCI Emerging Markets Index. China’s GDP grew by 7.7% in the first nine months of 2013: robust but less than had become customary. At the November 2013 Plenum, the Chinese Communist Party’s economic planning meeting held every five years, President Xi Jinping hinted at plans to allow for greater market-driven growth. Already in 2013, the People’s Bank of China announced banks could set prime lending rates, and the government launched the Shanghai Pilot Free Trade Zone which will offer full currency convertibility of the Renminbi. The move highlights the gradual liberalisation of China’s monetary and economic policy, but China’s leadership has been quick to assert it remains in control of the reforms. Even so, China has found itself tied up in ongoing territorial disputes with Japan--China’s second largest trading partner. International concern overethnic tensions and violent clashes in Uighur-dominated Xinjiang Province remains another sore point, with potential to disrupt regional economic expansion and discourage foreign investment.

South Korea’s economy has grown dramatically in the past few decades. Although still classified as an emerging market by MSCI, many consider South Korea a developed country. Much of the private sector growth has been driven by a system of large conglomerates--such as Samsung, LG and Hyundai--but corporate governance concerns have dogged them as a result of their family-run structure. South Korea’s growth depends heavily on China, its largest market for exports.

Taiwan is also dependent on China as a trading partner. Its export-driven economy has expanded considerably in the last few decades. Recent growth, however, has not been as robust as some of its neighbours. Its GDP grew by just 1.6% in the twelve months through the end of the third quarter.

Thanks to its wealth of natural resources, Brazil has benefited from the rise in commodity prices over the last decade and the rapid growth of raw material exports toChina. With China’s own exportsslowing, however, the demand for raw materials could fall considerably. Further muddying the picture is the extensive natural gas discoveries in the U.S. Politically, Brazil is in flux. Widespread protests during the summer over the cost of public transit showcased the country’s growing social unrest and public dissatisfaction with ineffective government spending.

Indeed, Brazil’s growth has slowed. From its record setting 7.5% in 2010, GDP growth tumbled to 0.9% in 2012. The 2014 FIFA World Cup and 2016 Olympic Games have become major costs to the government, but which President Dilma Rousseff has justified through forecasted job creation and infrastructure development.

Over the last ten years, the MSCI Emerging Markets Index has had an annual return of 12.41% versus 7.38% for the MSCI World Index, which covers only developed market equities. Its price-to-earnings ratio was 11.67 at the end of October, up from its low of 7.1 in May 2009.

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The MSCI Emerging Markets Index is a free-float market capitalisation-weighted index covering 21 emerging market countries from all over the world. It currently has 818 large- and mid-cap constituents and covers approximately 85% of the free float-adjusted market capitalisation of the component countries. The index is reviewed quarterly, with size cut-offs recalculated semi-annually. The universe is initially screened for liquidity, as measured by the value and frequency of trading. The median constituent has a market capitalisation of $2.2 billion. At the end of October 2013, the top geographic exposures were China, South Korea and Brazil, with respective weights of 19.0%, 15.9%, and 11.8%, followed by Taiwan at 11.5% and South Africa at 7.5%. On a sector basis the index is broadly diversified. The top weight is Financials, comprising 27.3% of the total, followed by Information Technology at 15.3%, Energy at 12.0%, Materials at 9.8%, and Consumer Discretionary at 8.8%. The index is not very concentrated, with just 16.6% in the top 10 names. The top position is Samsung Electronics Co., at a 3.95% weight.

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The fund uses optimised sampling to try to capture the performance of its benchmark, holding a physical basket of securities designed to match the characteristics of the underlying index but not the exact stocks in the exact weights. Compared to the index’s 818 constituents, the fund held 476 positions at the end of October 2013. The fund is domiciled in Ireland and uses the U.S. dollar as its base currency. At the time of writing it had assets of $277 million. Cash received as dividends from the underlying stocks is held by the fund until distributions are made to fund unit holders on a quarterly basis. This can create a cash drag on the portfolio, causing it to underperform its benchmark in rising markets, and outperform in declining markets. Given the fund’s distribution yield of 1.94% annually at the time of this writing, the cash build-up between quarterly distributions is unlikely to amount to much. The fund does engage in securities lending. In the twelve months through the end of September 2013, an average of 0.8% of the portfolio was out on loan, and in total the activity added roughly 1 basis point of net return. To mitigate counterparty risk, HSS, an HSBC division acting as lending agent, requests that all securities on loan are over-collateralised by a minimum of 5%. HSBC offers further protection by providing default indemnification in the case that external borrowers are used. In the case that HSBC is the borrower, there is no indemnification offer, as HSBC can’t provide indemnity against its own default. 100% of securities lending revenue, net of costs, is passed on to the fund. In March 2012, HSBC introduced a 20% limit on the amount of assets that any of its funds can lend out.

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The fund’s total expense ratio is 0.60%, which is typical of funds offering similar exposure. Other costs potentially borne by the unitholder but not included in the total expense ratio include bid-ask spreads on the ETF, securities lending fees, transaction costs on the infrequent occasions when the underlying holdings change, and brokerage fees when buy and sell orders are placed for ETF shares. Income generated from securities lending could potentially recoup some of the total costs.

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For broad exposure to emerging markets there are many choices out there. Providers that offer ETFs tracking the MSCI Emerging Markets Index include UBS, Amundi, SPDR, ComStage, Lyxor, Source, iShares and db x-trackers. Vanguard FTSE Emerging Markets ETF follows a different benchmark but provides a similar exposure. For alternatives to market capitalisation-weighted exposures, there are Ossiam ETF Emerging Markets Minimum Variance and PowerShares FTSE RAFI Emerging Markets ETF. Of all of these, the largest are the iShares and the db x-trackers funds, with assets of $5.7 billion and $3.2 billion respectively. The funds with the lowest TERs are the Amundi product, the Vanguard product and the UBS product, each with a TER of 0.45%.

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Über den Autor

Morningstar ETF Analysts  research hundreds of ETFs available to European investors. The Morningstar Rating for ETFs is based on a risk-adjusted performance measure.