DWS has introduced a new synthetic exchange-traded fund (ETF) that targets Chinese mid-cap stocks, expanding its product offerings in a challenging market environment. The Xtrackers CSI500 Swap UCITS ETF, which launched at the end of July, employs indirect replication to track the CSI 500 Net Total Return index. This index is composed of 500 medium and small-cap companies listed on the Shanghai Stock Exchange or Shenzhen Stock Exchange.
The ETF, which has a total expense ratio of 0.35%, is now available for sale across several European countries, including France, Germany, and Italy.
The launch of this ETF occurs against a backdrop of multiple asset managers shutting down or planning to close their China-focused funds, primarily due to difficulties in attracting investor interest. Just last month, Global X ETFs, a US-based ETF provider, announced it would be closing three Ireland-domiciled Chinese equity ETFs by the end of the month.
Similarly, State Street Global Advisors delisted its Ireland-domiciled SPDR Bloomberg China Treasury Bond UCITS ETF from the London Stock Exchange in July, citing a lack of demand. Additionally, Krane Funds Advisors, another US-headquartered firm, shut down two Ireland-domiciled China ETFs in May.
The industry has seen further contractions, with Barings closing its China A-share fund in May due to a drop in investor demand, and Invesco shutting down a quantitative fund investing in mainland Chinese equities in March after it failed to accumulate sufficient assets.
According to data, China equity funds domiciled in Europe experienced net outflows of €3.9 billion in the first four months of 2024, highlighting the ongoing challenges in this market segment.
In response to these trends, DWS also rolled out an emerging market ex-China equity ETF last week, catering to the growing demand from investors seeking to diversify their portfolios by reducing exposure to China.
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