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WisdomTree lists emerging Asia equity income ETF


ETF sponsor, WisdomTree, has listed the WisdomTree Emerging Asia Equity Income UCITS ETF (DEMA) on the London Stock Exchange today. WisdomTree UCITS ETFs are physical funds, and in the case of the Emerging Asia equity income fund, uses a physical, optimised replication methodology to track the index. 

The WisdomTree Emerging Asia Equity Income Index strategy is made up of the highest 30 per cent of companies domiciled in Emerging Asia ranked by dividend yield. The resulting constituents are used to construct a broadly diversified exposure, with a 4.5 per cent single stock weighting cap, a 33.3 per cent sector cap and a 33.3 per cent country cap combined with a unique fundamental weighting strategy based on the absolute amount of dividends paid by the companies. The methodology helps to mitigate risk and focus on the larger dividend paying countries and sectors.
WisdomTree writes that the academic research shows that indices weighted by dividends, or which include higher yielding companies, have tended to outperform market capitalisation indices over the long run.
Dividends are the most popular smart beta category in Europe, but the launch of DEMA is the first Emerging Asia equity ETF in Europe to be weighted by dividends. WisdomTree writes: “As clients become more experienced with investing in emerging markets, they are realising that returns from investing in different emerging regions may be driven by local factors, and as a result, our clients repeatedly requested that we apply our trusted dividend methodology to Emerging Asia equity markets. DEMA is the third emerging market equity ETF on our ETF platform, with the other two being the WisdomTree Emerging Market Equity Income UCITS ETF (DEM) and the WisdomTree Emerging Market SmallCap Dividend UCITS ETF (DGSE).”
Viktor Nossek, Director of Research at WisdomTree Europe says: “The WisdomTree Emerging Asia Equity Income UCITS ETF provides a balanced exposure to the highest yielding companies in the region. It has over 300 constituents and features a mid to small cap bias with close to 62.5 per cent of the index comprised of stocks with a market capitalisation below USD10 billion. The strategy has a large allocation to high dividend yielding countries like China and Taiwan whilst underweighting low dividend countries such as India and South Korea. At a sector level it is overweight financials and defensives such as telecoms, energy and utilities.
“The capping of individual sector and country exposures at 33.3 per cent creates a balanced portfolio, providing risk control at different parts of the investment cycle. The low price to book and PE ratios are a reflection of how the index aims to capture value stocks whilst the historic dividend yield of 6.1 per cent compares favourably to competing indices.”
Hector McNeil, Co-CEO of WisdomTree Europe commenting on the launch, says: “WisdomTree Europe is delighted to launch the WisdomTree Emerging Asia Equity Income UCITS ETF. This new ETF is Europe’s first dividend focused ETF covering emerging Asian equity markets. The index methodology is the same that underpins many existing WisdomTree ETFs and has helped the company grow to become the fifth largest ETF issuer in the US market and the seventh globally.”

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