WisdomTree launches ETFs with exposure to China, Japan

Canadian investors looking for exposure to Chinese stocks have a new option as of Friday.

WisdomTree Asset Management launched an ETF on the Toronto Stock Exchange that provides access to Chinese stocks, including A-shares, which are traded on exchanges in Shanghai and Shenzhen and are more restricted to foreign investors.

The WisdomTree ICBCCS S&P China 500 Index ETF seeks to track the S&P China 500 Index CAD, which selects the largest 500 eligible companies from the S&P Total China BMI Index.

Read: How stocks from mainland China are finding their way into funds and ETFs

Jeff Weniger, asset allocation strategist at WisdomTree, said the ETF has the benefit of offering Chinese equities listed on exchanges inside and outside China. Investors looking for exposure to the world’s second-largest economy can treat the ETF as they would the S&P 500 in the U.S., he said.

“If I’m looking to put together an asset allocation, and I have a China view where I want to have a specific line item for China, I can make this the one holding and cover all of my bases,” he told Advisor.ca.

The historically more volatile mainland Chinese A-shares were only recently added to the MSCI Emerging Markets index. The mainland exchanges include more state-owned enterprises and are more susceptible to government influence. They also provide exposure to domestic sectors benefiting from China’s consumer growth.

In a June market commentary, BlackRock global chief investment strategist Richard Turnill noted that A-shares have a lower correlation with global equities, due to restrictions on foreign capital, and therefore offer “diversification benefits.”

Read: Look to Chinese A-shares for greater diversification: BlackRock

Roughly half (48.5% as of June 30) the index invests in A-shares, a WisdomTree release said. By including stocks listed in mainland China as well as in Hong Kong, Singapore and New York, Weniger says the ETF mitigates some of the risks from mainland China.

The management fee for the non-hedged units of the fund is 0.55%.

Japan ETF focuses on global companies

The firm is also launching the WisdomTree Japan Equity Index ETF Friday on the TSX. That ETF will track the WisdomTree Japan Equity Index CAD, providing exposure to dividend-paying stocks traded on the Tokyo Stock Exchange but that derive less than 80% of their revenue from sources in the Japanese market, thus focusing on more global companies.

The management fee is 0.51% for hedged units and 0.48% for non-hedged.

Weniger says both products provide opportunities for “home-biased” Canadian investors with little exposure to the two massive Asian economies.

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Country of the Month: Japan