Analyse: UBS-ETF MSCI Pacific (ex Japan) I

Australien, Hongkong und Singapur dominieren diesen Aktien-ETF. Banken und Minengesellschaften überwiegen auf der Sektorebene.

Lee Davidson 07.09.2012

Rolle im Portfolio

The UBS-ETF MSCI Pacific (ex-Japan) provides exposure to the slightly more developed and less risky Pacific equity markets in Australia, Hong Kong, and Singapore. Investors can consider this fund somewhat of a hybrid vehicle offering indirect exposure to emerging markets but behaving more like a developed stock index. These nations tend to have well-established regulatory bodies compared to many of their emerging market neighbors, which mitigates some of the country-specific risk of investing internationally. However, investors seeking to capitalise on emerging market growth can still target this fund since many of index constituents tend to have operations across or engaging with the fast-growing Asian emerging market economies. China, in particular, is integral to this fund's performance. The Australian mining sector (~12% of the index) relies on continued Chinese demand for iron ore and coal. Not surprisingly, given their close association, Hong Kong has significant operations in China through its financial, real estate, and utility firms. Similarly, Singapore directly invests in China through its banks and property firms. Therefore, much of this fund's performance in short-to-medium term will be linked inextricably to the Chinese growth story.

Fundamentale Analyse

In recent years, Australia's economy has prospered due to the nation's ample supply of natural resources and stable government. Unlike much of the world, the effects of the financial crisis were muted in Australia due to their highly regulated banking system, which prevented significant exposure to toxic assets. Moreover, during the crisis, Australia's economy was buoyed by rising international demand for commodities. Today, Australia is the largest exporter of coal and iron ore, which together account for nearly 40% of their total exports. Much of Australia's growth and performance can be attributed to rising demand for commodities from China and other emerging markets. These trends seem poised to continue, albeit at a slower pace, and Australia stands ready to benefit.

Australia's heavy reliance on commodity exports, however, has had some negative externalities for the nation's non-commodity exporters, namely the appreciating Australian dollar. Specifically, over the past two years, the Australian dollar has appreciated 16.3% on an annualised basis against the US dollar. As demand for commodities rises, the Australian dollar tends to rise to such an extent that industry experts have labeled it a “commodity currency”. Australia's non-commodity exporters have suffered with the appreciating dollar due to their inability to remain competitive abroad. In July 2012, the Australian government addressed the dislocation of export growth between commodity producers and non-commodity producers by imposing a resource tax on commodity producers. The proceeds from the tax are scheduled to be used to fund small business tax cuts and domestic infrastructure projects.

Hong Kong – a special administrative region of China – has enjoyed the fruits of a strengthened relationship with China since 1997 when China resumed sovereignty. Hong Kong firms in this index provide exposure primarily to the macroeconomic trends in China's real estate and utilities markets. From 2007-2010, China experienced a residential property boom with price increases ranging from 10% to 50% across major Chinese cities. Since this run-up in housing prices, according to S&P, real estate developers in China have trudged through debt-related challenges and a lack of demand. However, in the second half of 2012, S&P anticipates that stabilisation will return to China's real estate market likely proving to be a boon for Hong Kong real estate firms.

Singapore's rapid growth has largely been attributed to its ethical government, strong commercial laws, state-level planning, strategic location, and highly-educated, manageable population. While Singapore is not rich in natural resources, the nation has faced less regional competition in highly skilled service industries given its quality of education. Moreover, Singapore has been successful at attracting foreign investment. Within Asia, Singapore is a major investor with the world's largest foreign direct investment into China. Going forward, some real estate firms in the index could be hampered by the potential housing bubble in China, but the economy's fundamentals appear solid overall.


Indexkonstruktion

The UBS-ETF MSCI Pacific (ex-Japan) tracks the free-float market capitalisation weighted MCSI Pacific ex-Japan index, which intends to represent 85% of the publicly available total market capitalisation of equity markets in Australia, Hong Kong, New Zealand, and Singapore. Australian equities make up the bulk of the index (64%), followed by Hong Kong (22%), and Singapore (14%). At the time of this writing, the index has 146 constituents, and top holdings are BHP Billiton (8%), Commonwealth Bank of Australia (7%), Westpac Banking Corp (5%), and Australia and New Zealand Banking Group (5%). Due to the characteristics of index constituents, the index is relatively top-heavy in its sector concentration with the largest sectors being financials (50%), materials (15%), industrials (9%), and consumer staples (7%). The average market capitalisation for the index’s constituents is $35 billion.

Fondskonstruktion

The UBS-ETF MSCI Pacific (ex-Japan) uses optimised physical sampling to track its reference index. The ETF invests in only in a portion of the index’s constituents, aiming to represent the benchmarks’ risk-return characteristics as closely as possible. In addition to shares of the reference index, the fund may invest in transferable securities, money market instruments, units of UCIs, deposits with credit institutions, and structured notes to track the reference index. UBS may engage in securities lending to generate additional revenues. The lending revenue generated can partially offset the TER, but UBS does not disclose what portion of revenue generated is returned to shareholders. To protect the fund from the counterparty risk that results from this practice, UBS takes collateral greater than the loan value. Collateral levels vary from 102% to 115%, depending on the assets provided by the borrower as collateral. UBS also provides borrower default indemnification in the event that a borrower is unable to return the securities. Cash received as dividends from the underlying stocks is held in the fund’s income account until it is distributed to fund holders. Distributions are made on a semi-annual basis. This dividend treatment can potentially create a drag on returns in upward trending markets as dividends are not immediately reinvested into the fund. In practice this cuts both ways. It could also result in outperformance if the benchmark falls in this interim period. The fund is domiciled in Luxembourg and its base currency is USD.


Gebühren

The UBS-ETF MSCI Pacific (ex-Japan) ETF charges a total expense ratio (TER) equal to 0.40%, which is lower than most other ETFs tracking the MSCI Pacific (ex-Japan) index.

Alternativen

There are several ETFs available offering exposure to the MSCI Pacific (ex-Japan). The primary differentiating factor amongst them will be liquidity and replication methods. Among the physical replication ETFs available, iShares offers the most liquid option tracking the MSCI Pacific (ex- Japan) index in terms of average daily volume. The iShares ETF levies a TER of 0.45%.

db X-trackers offers the most liquid ETF tracking the MSCI Pacific (ex-Japan) index as measured by average daily volume. The firm’s Xetra-listed fund uses synthetic replication to track its benchmark. By using synthetic replication, db x-trackers has maintained a much lower tracking volatility than its physical peers over the past two years based on data from Morningstar Direct. To benefit from improved tracking, investors take on some level of counterparty risk inherent in the synthetic replication structure. This fund levies a TER of 0.45%.

 

Über den Autor

Lee Davidson  is an ETF analyst with Morningstar Europe.