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db X-trackers launches first Asia ex-Japan USD corporate bond ETF


Deutsche Asset Management’s db X-trackers platform has launched the world’s first exchange-traded fund (ETF) providing exposure to the Asia ex-Japan US dollar corporate bond market.

db x-trackers II iBoxx USD Liquid Asia Ex-Japan Corporate Bond UCITS ETF (DR) has listed on the Deutsche Börse today and is due to list on the London Stock Exchange next week.
The ETF tracks an index currently composed of 148 investment-grade corporate bonds from nine countries. It is a direct, physical replication ETF.
“Asia US dollar investment-grade (IG) corporate bond issuance increased from around USD 21 billion dollars in 2010 to around USD 63 billion dollars in 20153. This is an important and growing section of the global bond market, and this new ETF provides investors with a flexible and efficient way to access such exposure,” says Anson Chow, Deutsche AM’s head of exchange traded product development, Asia Pacific.
The ETF’s underlying index is the Markit iBoxx USD Liquid Asia Ex-Japan Corporates Large Cap Investment Grade Index. Only bonds with over USD750 million in outstanding notional qualify for inclusion in the index, which has a yield of 3.10 per cent, average duration of 5.03 years, and average credit quality of ‘A-’.
“It’s interesting to observe that over the past three years the Asia investment-grade corporate bond market has generally shown a higher volatility-adjusted return compared to the US IG corporate universe. And that in the past 10 years there have been no defaults in the bonds included in the index underlying this ETF,” adds Chow.
As of 31 August, Chinese corporate bonds represent the highest weighting in the index, at slightly more than 50 per cent. Corporate bonds from Hong Kong and India both have weightings of more than 10 per cent. This is consistent with Greater China and India representing over 70 per cent of the GDP of the Asia ex-Japan region. Other countries represented in the index are Malaysia, Indonesia, Singapore, Thailand and South Korea.
The ETF has an annual all-in fee of 0.30 per cent.    

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