Analyse: db x-trackers MSCI Pacific ex-Japan

Dieser ETF bringt wenig Asien, viel Australien - und somit eine hohe Gewichtung von Minen- und Finanzaktien.

Alastair Kellett 22.06.2012

Rolle im Portfolio


The db x-trackers MSCI Pacific ex-Japan fund provides exposure to large- and mid-cap stocks within several of the developed Asian markets, outside of Japan. The MSCI Pacific ex Japan Index is diversified across a fairly large number of individual holdings, but is narrowly focused in a couple of important ways. On a geographic basis, almost two-thirds of the index is made up of Australian stocks, and on an industry basis, almost two-thirds comes from Financials and Materials. As a result, this fund is best viewed as a tactical play on the developed markets of Asia, particularly on Australia, and secondarily as a play on the commodities cycle, upon which the Australian economy is deeply reliant. Returns from the underlying index have been fairly volatile, exhibiting annualised standard deviation of almost 18% since 1992. The index has been more volatile than a pure Australian exposure. Over the 20 year period, the index has shown a correlation to the local currency returns of the S&P 500 and the MSCI Europe Index of 68% and 69%, respectively. But over the last five years those correlations have risen to 89% and 91%, implying the index has brought less diversification benefit. The fund does not pay out any distributions; hence it would not suit an investor looking for regular investment income.


Fundamentale Analyse


Although it’s not part of the index, China looms in the background as the largest economy in the region and a vital trading partner to the countries that are part of the benchmark. Australia has a lot of “stuff in the ground,” and a rapidly growing China has had an insatiable appetite for those raw materials. That appetite, as well as Malthusian concerns about the world running out of non-renewable resources, has driven a terrific bull market for commodities over the last decade. Countries like Australia and New Zealand, with lots of resources and stable governments, have been beneficiaries of this trend. The concern right now is that with China slowing down and other parts of the world in recession, the demand for raw materials could fall considerably. China’s growth fell to an annualised rate of 8.9% in the fourth quarter of 2011, and the Chinese government recently targeted a 7.5% figure for 2012. The city-states of Hong Kong, which returned to Chinese sovereignty in 1997, and Singapore, have both thrived as financial hubs. In both cases, the Financials sector dominates the equity market, making up 46.1% of the MSCI Singapore Index and a whopping 61.5% of the MSCI Hong Kong. That poses a significant risk, particularly as governments around the world look for new ways to regulate banks and financial markets in the aftermath of the global financial crisis. But as the entire region continues to grow, and financial hegemony shifts from West to East, these English-speaking hubs are likely to see their influence magnified. Over the past 20 years, the MSCI Pacific ex-Japan Index has produced a total annualised return of 7.51%, which is less than the local-currency returns of either the S&P 500 or the MSCI Europe Index, which posted respective gains of 8.31% and 7.70%, and with less volatility than the Pacific ex-Japan exposure. Of the individual country components, Singapore has been the weak link, returning 6.23% over the same period, versus an average of 9.23% for Australia and Hong Kong. After bottoming out at 7.5 in February 2009, the price-to-earnings ratio of the MSCI Pacific ex Japan Index has climbed back up to 11.2 at the end of February 2012. That still puts it below its five-year average of 13.4.


Indexkonstruktion


The MSCI Pacific ex Japan Index is a free-float market capitalisation-weighted index consisting of 146 constituents across four countries: Australia, Hong Kong, Singapore, and New Zealand. The index covers approximately 84% of the market capitalisation of these markets. New entrants must pass minimum requirements for liquidity and length of trading history. It is reviewed quarterly, and rebalanced semi-annually with new size cut-offs calculated. At the end of February the index’s top country weights were Australia at 63.7%, Hong Kong at 22.1%, and Singapore at 13.3%. New Zealand had a 0.9% weight. Financials was far and away the biggest sector component, at 47.8% of the total, followed by Materials at 17.6% and Industrials at 9.1%. There is meaningful portfolio concentration, with the top 10 names making up 38.8% of the total. BHP Billiton, a mining company, is the top holding at 8.81%, and makes up almost 14% of the Australian exposure.


Fondskonstruktion


The fund employs synthetic replication to provide exposure to the underlying benchmark, entering a funded swap with counterparty Deutsche Bank. Investors’ cash is transferred to Deutsche Bank, which then puts collateral in a segregated account pledged to the fund. Currently, the collateral consists mainly of publicly-listed equities, as well as roughly 7% corporate bonds. The collateral is marked to market every day, and according to Deutsche Bank its total value at the time of writing was 119% of the fund’s net asset value. The fund’s prospectus states that it cannot have counterparty exposure exceeding 10%, implying that the collateral must at a minimum be valued at 90% of the fund’s net assets. Collateral will be held and managed by a third party bank. Under the terms of the swap, the counterparty agrees to provide the fund with exposure to the total return of the underlying index, net of any costs or fees associated with providing the exposure. The return from the swap assumes that all dividends paid by the underlying stocks are reinvested in the index. This fund does not pay out any dividend distributions. Although permitted to do so, it is not currently the intention of the provider to engage in any securities lending activity with the fund’s assets. The fund has assets of roughly $400 million.


Gebühren


The fund’s total expense ratio (TER) is 0.45%. Other costs potentially borne by the unitholder but not included in the TER include swap fees, bid-ask spreads on the ETF, transaction costs on the infrequent occasions when the underlying index holdings change, and brokerage fees when buy and sell orders are placed for ETF shares.


Alternativen


To get exposure to equities in the Asia ex-Japan region, there are a few choices, albeit referencing different underlying indices and with less exposure to Australia. Possible alternatives in Europe include Amundi ETF MSCI Pacific ex-Japan, iShares MSCI AC Far East ex Japan, Lyxor ETF MSCI AC Asia ex-Japan, UBS-ETF MSCI Pacific (ex-Japan), and HSBC MSCI Pacific ex-Japan. Of these, the iShares fund is the largest, with assets of $2.1 billion. The fund with the lowest TER is the HSBC product, at 0.40%.


In Asia, possible alternatives include the Lyxor ETF MSCI AC Asia-Pacific ex Japan (P60, listed in Singapore, TER of 0.65%) and the db X-trackers MSCI AC Asia Pacific ex Japan TRN Index ETF (O9B, listed in Singapore, TER of 0.50%).

Über den Autor

Alastair Kellett  Al Kellett is an ETF analyst with Morningstar Europe.