iShares has made another round of additions to its ETF lineup of well more than 200 products, debuting funds that target small cap stocks in Hong Kong and Singapore. The company also debuted an ETF linked to the MSCI World Index, a broad benchmark of stocks in developed markets:
MSCI Hong Kong Small Cap Index Fund (NYSEARCA:EWHS)
This ETF offers exposure to small cap stocks listed in Hong Kong, giving investors an opportunity to tap into a set of smaller companies that often derive significant revenues from mainland China [see Special Report: China ETFs In Focus]. EWHS has about 44 stocks in total, with no one name accounting for more than about 5% of the total portfolio. The sector breakdown of EWHS is somewhat unique for an international ETF; the consumer discretionary sector accounts for close to 45% of the underlying index, with financials (18%) and industrials (12%) also making up significant chunks.
EWHS joins the existing iShares MSCI Hong Kong Index Fund (NYSEARCA:EWH), which has gathered almost $2 billion in assets since its debut in 1996. IndexIQ debuted a Hong Kong Small Cap ETF (HKK) in May of last year, but shuttered it in late 2011 after the fund struggled to gain assets.
EWHS charges an expense ratio of 0.59% [see EWHS fact sheet].
MSCI Singapore Small Cap Index Fund (NYSEARCA:EWSS)
This ETF offers exposure to small cap stocks in Singapore, a small developed Asian market that has shown tremendous growth potential in recent years. EWSS is linked to an index that is designed to measure stocks in the bottom 14% of equity market cap in Singapore, and consists of about 37 individual components. Not surprisingly, the portfolio is tilted heavily towards financial and real estate firms–this segment accounts for about half of the total holdings of EWSS.
iShares also already offered a large cap Singapore ETF; the MSCI Singapore Index Fund (NYSEARCA:EWS) debuted along with EWH in 1996, and currently has about $1.3 billion in assets. The index underlying EWSS has an average market cap of about $1.1 billion, compared to more than $16 billion for EWS.
EWSS will also charge an expense ratio o f0.59%.
MSCI World Index Fund (NYSEARCA:URTH)
iShares also debuted an ETF linked to the MSCI World Index, a broad-based measure of developed market stocks. The cleverly-named URTH consists of about 1,500 stocks from advanced economies, with about half of the portfolio in U.S. stocks. The largest representatives in the international section of the portfolio include the UK, Japan, Canada, France, Switzerland, Australia, and Germany. In total, URTH includes allocations to about two dozen different markets. Unlike the other two new iShares ETFs, URTH consists primarily of large cap stocks; the top ten weightings include several well-known U.S. firms such as Exxon, Apple, IBM, and General Electric.
URTH has an expense ratio of 0.24%.
Small Cap ETFs In Focus
EWHS and EWSS join a few other iShares ETFs targeting small cap international stocks, including ECNS (China), EWZS (Brazil), SCZ (EAFE region), SCJ (Japan), and EEMS (emerging markets). In recent years, investors have embraced small cap ETFs as tools for rounding out international equity exposure. The “first generation” of international stock ETFs, such as EWH and EWS, consist primarily of large cap stocks that tend to derive revenue and earnings from around the globe. Smaller companies, on the other hand, are more likely to depend on local consumption to drive profitability–which can make them more of a “pure play” on the underlying economy. Coco-Cola (NYSE:KO), for example, is a U.S.-listed stock that depends primarily on markets beyond the U.S. for its earnings.
Besides the handful of iShares ETFs mentioned above, there are a number of additional small cap international ETFs covering markets such as Russia (NYSEARCA:RSXJ), South Korea (NASDAQ:SKOR-OLD), Canada (NYSEARCA:CNDA), Australia (NYSEARCA:KROO), and India (NYSEARCA:SCIN).
Disclosure: No positions at time of writing.
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