SSgA launches emerging Asia Pacific small cap ETF

Jan 18th, 2012 | By | Category: Equities

State Street Global Advisors (SSgA) has launched the SPDR S&P Small Cap Emerging Asia Pacific ETF, the first ETF to track emerging Asia Pacific small caps.

SSgA launches emerging Asia Pacific small cap ETF

The SPDR S&P Small Cap Emerging Asia Pacific ETF provides investors with access to companies poised to benefit from the domestic growth of emerging Asia’s middle class.

The fund provides investors with access to companies poised to benefit from the domestic growth of emerging Asia’s middle class.

The SPDR S&P Small Cap Emerging Asia Pacific ETF seeks to track the performance of the S&P Asia Pacific Emerging Under $2 Billion Index.  The index is a float-adjusted market capitalisation weighted benchmark that includes publicly listed companies with a total market capitalisation between $100 million and $2 billion.

Each individual stock is capped at a maximum of 25% of the index weight, and the top five stocks are capped at a maximum of 50% of the index weight. Among the countries historically covered in the index are China, India, Indonesia, Malaysia, Philippines, Taiwan, and Thailand.  As of 31 December, 2011, the index was comprised of 1,455 securities.

“Emerging market small cap stocks are an attractive opportunity for many investors, as broad emerging market equity funds are often dominated by large cap companies that rely on developed world demand,” said James Ross, senior managing director and global head of SPDR Exchange Traded Funds at SSgA.

Until now, investors were unable to gain direct, targeted exposure to Asian emerging market small caps stocks via a single ETF.  Two products that come close to tracking this sector segment are the iShares MSCI AC Far East ex-Japan SmallCap ETF, which offers exposure to East Asian small cap stocks, but includes developed markets (though not Japan), and the SPDR MSCI Emerging Markets Small Cap ETF, which offers exposure to small cap stocks throughout the global emerging markets universe. Both are listed on the London Stock Exchange.

This latest SPDR product narrows the focus, providing exact coverage of emerging market small caps within the Asia Pacific region. “In providing investors with precise access to an asset class with the potential to provide portfolio growth and diversification benefits, the SPDR S&P Small Cap Emerging Asia Pacific ETF enhances our family of emerging market SPDR ETFs,” said Ross.

Fund characteristics

SPDR S&P Small Cap Emerging Asia Pacific ETF (13/01/2012)

While the fund is positioned towards the higher end of the risk spectrum, investors are, nevertheless, likely to be attracted to the potential opportunity of high returns and the portfolio diversification benefits it offers (the index has a beta of just 0.58).

The fund’s top five country weights are Taiwan (40.44%), China (20.58%), India (13.43%), Malaysia (9.54%) and Indonesia (6.60%); the top five sector weights are Information Technology (12.32%), Financials (9.66%), Industrials (8.95%), Consumer Discretionary (7.36%) and Materials (7.10%).

The ETF trades on the NYSE Arca (ticker symbol: GMFS) and has an annual expense ratio of 0.65%.

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