Analyse: db x-trackers CNX Nifty UCITS ETF

Dieser ETF kommt etwas konzentrierter daher als ETFs auf den MSCI India und hatte dieses Jahr bisher höhere Verluste zu verzeichnen. Bieten indische Aktien Chancen nach der scharfen Korrektur?

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Rolle im Portfolio

The db x-trackers S&P CNX Nifty ETF provides equity exposure to India. As with all single country emerging market exposures, this db x-trackers ETF would be best deployed as tactical tool within a well diversified portfolio. The ETF can also be deployed as a core holding complementing exposure to emerging markets in Asia and Latin America. Increased correlation with international stock markets over the past years makes the ETF less beneficial from a diversification point of view. The index correlated 74% with the MSCI World USD Index and 87% with the MSCI EM USD Index over the last five years; up from 69% and 80% respectively over the trailing ten year period. As the correlation with China remains relatively low, the ETF might be utilised as diversifier for equity exposure to China. The index correlated 37% with the MSCI China CNY Index over the last five years.

The ETF is suitable for investors believing in a story rooted in robust domestic demand streaming from the relatively young and increasingly affluent population in India. In addition, investors overweighting China can use the ETF to diversify their exposure within the emerging market equity segment of their portfolio.

Investors should keep in mind that the Indian equity market is still lacking transparency. The country does not permit free access to its market by controlling capital on the Rupee and on foreign investment. Indian companies have structural issues as many founders or India’s long-established business families hold controlling stakes in many companies; resulting in corporate governance issues. Especially the very complex ownership structure of companies with widespread pyramiding, cross-holding and the use of non-public trusts are far from transparent. In addition, accounting rules are yet to be up to international standards. Nevertheless, transparency has improved massively over the years.

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Fundamentale Analyse

In contrast to China and most developed markets, India has the benefit that its young, employable population is growing. However, the country still has a long way to go in modernizing its economy. Less than 10% of the working population is employed in a regulated job, leaving the remaining 90% without health and social insurance. With around 60% of its GDP coming from domestic sources, India is significantly more reliant on the development of its internal market than most emerging markets. In fact, domestic private consumption and investment are expected to remain the main drivers of GDP growth in the near future, although increased trade is expected to make a contribution at the margins as well. The country's large English-speaking workforce has made it a centre for the outsourcing of technology services; one of the more productive and export-oriented sectors of the economy.

India has long been one of the fastest growing economies in the world. However, economic growth has slowed down recently as high borrowing costs, weakening consumption and red tape for infrastructure and industrial projects weigh on investors’ sentiment. The pace of GDP growth eased to 4.4% y/y in Q2-13 from 4.8% in the preceding quarter. This was the weakest performance since Q1-09 and has been largely blamed on a drop in industrial output that could well continue going forward. Indeed,   manufacturing sector output contracted in August for the first time since March 2009 due to a drop in new orders. The HSBC PMI dropped to 48.5 from 50.1 in July; the fourth straight month of decline. As a result, HSBC has reduced its GDP forecast to 4.0% for the current fiscal year ending March 2014, down from a previous projection of 5.5%.

India has been amongst the hardest-hit emerging markets, as investors pull back in anticipation of tighter global liquidity, which has become the key growth driver for these economies in recent years. Faced with this situation, Prime Minister Manmohan is trying to convince investors that the economy will rebound later this year, supported by policies aiming to attract foreign capital. The PM argues GDP will expand by 6-8% in the next two to three years. However, economists doubt the economy could grow by even 5% this year. Recent government initiatives to boost growth – e.g. speeding-up the process for delayed industrial projects and allow for greater foreign ownership – have yet to materialise.

The country’s large current account deficit – already over 60% of its full-year target in the quarter – is of particular concern as it must be financed by foreign money at a time when the rupee is hitting all-time lows to the US-Dollar. This has prompted the Reserve Bank of India to take measures to reduce speculative trading in currencies, blaming this activity for the depreciation of the rupee and the subsequent damage to the country’s growth prospects.

Overall, India is struggling under high inflation, a ballooning fiscal deficit, tight credit and a slow-acting government to changes in the market, hurting not only business confidence but also weighing on industrial production.

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The S&P CNX Nifty Index provides exposure to Indian equities, representing the largest and most liquid stocks in the country. The index is market capitalisation weighted, including 50 of the 935 stocks listed on the National Stock Exchange of India Ltd (NSE). This represents approximately 60% of the overall market capitalisation of the country. The constituents are spread across over 20 sectors and thereby offer well-diversified access to the Indian stock market. To be considered, component stocks have to meet three criteria. The stocks have to be liquid, taking impact costs as a measurement; the constituents have to have a six-month average market capitalisation of at least Rs 5bn and at least 12% of its stocks must be available to investors. The index is calculated real-time during market hours and is reviewed quarterly with a 6 week notice given to markets before the changes will be made in the index. As of writing, financials (24% of the index’s value) is the biggest sector allocation, followed by IT (17%) and Energy (14%). The index is very top heavy, with the top ten holdings representing almost 60% of the index’s value.

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The db x-trackers S&P CNX NIFTY ETF uses swap-based replication methods to track the S&P CNX NIFTY Index. To achieve this return, the fund invests in a fully-funded swap with its parent company Deutsche Bank. Under this swap agreement, the proceeds of fund holders’ investment in the ETF are transferred to the swap counterparty in exchange for the performance of the index. To mitigate counterparty risk, db X-trackers requests that Deutsche Bank post collateral in a segregated account with the custodian State Street Bank Luxembourg in Deutsche Bank’s name of and pledged in favour of the fund. Should Deutsche Bank default, the ETF may be terminated and assets of the ETF liquidated without giving prior notice to the bank. As of writing, the collateral comprises a large majority of OECD country equities and various other types of securities including government bonds. The company applies haircuts to the collateral’s market value (7.5%-20% for equities, 10% for corporate bonds, 0% for government bonds), which results in overcollateralisation of the fund. Collateral is reviewed daily by third party State Street Global Advisors (SSgA). At the time of writing, the collateral value is equivalent to 108.8% of the fund's NAV. The fund doesn't engage in securities lending, which limits counterparty risk at the fund’s level.

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The fund levies a total expense ratio of 0.85%. This falls in the upper range of ETFs in line with other ETFs racking the Indian stock market. Other potential costs associated with holding this fund which are not included in the TER include swap costs, bid-ask spreads and brokerage fees.

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As of writing there are a few ETFs offering equity exposure to India. Most of the indices are tracking either the MSCI India Index or the S&P CNX Nifty Index. The largest alternative in terms of total assets under management is the swap-based Lyxor ETF MSCI India. The MSCI India Index is a free-float-adjusted market capitalisation index, representing about 85% of the NSE. Therefore, the Lyxor ETF represents a slightly bigger share of the Indian economy. Investors interested in a more like-for-like alternative will find the iShares S&P CNX Nifty India Swap, tracking the same index as the ETF discussed here. The iShares ETF also uses synthetic replication and levies a TER of 0.85%. 

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Über den Autor

Gordon Rose, CIIA, CAIA,

Gordon Rose, CIIA, CAIA,  war von 2011 bis 2014 Fondsanalyst bei Morningstar.