Deutsche Bank has announced the launch of four new ETFs which are linked to the MSCI Pakistan Investable Market Index, the MSCI Bangladesh Investable Market Index, the MSCI Singapore Investable Market Index and the MSCI Asia Pacific Ex Japan Index on Singapore Stock Exchange (SGX).
The economy of Bangladesh has moved into the fast lane
The new series of ETFs includes the first ever ETFs to be linked to Pakistan and Bangladesh.
“These new ETFs are great examples of the kind of market-leading and innovative products that have allowed Deutsche Bank ETFs to raise more than US$50 billion in assets under management globally,” said Marco Montanari, Head of Deutsche Bank ETFs and db-X funds, Asia.
“Pakistan and Bangladesh are among the 10 most populated countries in the world and both markets present interesting characteristics. Pakistan has one of the lowest P/E in the region and a dividend/yield over 7%. Its market cap/GDP ratio is just around 20%, significantly lower than the average of emerging markets which is around 45%. This shows a large potential of future capital growth. Bangladesh had an average annual GDP growth of over 6% in the last 5 years with a poverty rate in decline from 40% in 2005 to 31.5% in 2010, also thanks to a strong export growth boosted by light manufacturing cost which stand at around 15% of coastal China” he said.
All ETFs offered by db X-trackers in Singapore are UCITS compliant. They track their underlying indices via swaps, a tracking method often referred to as synthetic replication. This involves the ETF provider entering an agreement with a swap issuer, which in db X-trackers’ case is Deutsche Bank, to provide the returns of the index being tracked.
Follow recent concern relating to swap-based ETFs, Deutsche Bank have confirmed that all db X-trackers ETFs are 100% collateralised on a daily basis, with details published in full daily on the db X-trackers website, and that they will not engage in securities lending.
“In the vast majority of cases, overall for emerging markets, synthetic replication is the best method for constructing an ETF without incurring a significant tracking error. In 2008 we launched an ETF linked to another frontier market: Vietnam. Now this ETF is the largest single country frontier market ETF in the world with over USD 250 million assets under management. We have the same ambition for our ETFs on Pakistan and Bangladesh” said Mr Montanari.
He added that the db X-tracker ETFs are domiciled in Luxembourg and can represent a tax efficient investment option for investors compared with other off-shore ETFs, especially those domiciled in the US which may be taxed up to 30 percent on their distributions.
Nels Friets, Head of Securities at SGX, commented: “We are pleased that Deutsche Bank is adding to its suite of innovative SGX-listed products with the launch of the first ever ETFs linked to Pakistan and Bangladesh. SGX now has 88 listed ETFs, highlighting its position as a one-stop venue for investors to participate in various Asian markets, sectors, and asset classes.”