Deutsche Bank Would Cut Yuan Risk From China Stocks With ETF

U.S. investors may soon be able to buy Chinese stocks without worrying about the effect of the increasingly volatile yuan.

Deutsche Bank AG’s wealth-management unit is planning an exchange-traded fund that removes the currency risk from owning shares listed on the Shanghai and Shenzhen stock exchanges, regulatory filings show. The fund, which will track a hedged version of the CSI 300 index, will mitigate its exposure to the Chinese currency using one-month forward contracts on offshore-traded yuan.

China’s shock devaluation of its currency last month sent foreign-exchange volatility soaring and prompted foreign investors to start considering the impact of the nation’s foreign-exchange policy on their investments. The central bank will weigh the previous day’s close, currency supply, and demand when setting the yuan’s reference rate, officials said at the time.

“Chinese equities remain an important portion of investors’ emerging-market allocation, and an ETF that could remove some of the risks associated with currency devaluation might be attractive to them in the long-run,” said Eric Mustin, vice president of ETF trading solutions at broker WallachBeth Capital LLC in New York.

Dodd Kittsley, head of ETF strategy and national accounts in New York at Deutsche Asset and Wealth Management, declined to comment on the planned fund as it is still seeking approval.

The yuan closed at 6.3571 per dollar in Shanghai on Wednesday, 2.4 percent weaker than before the devaluation.

An unhedged Deutsche Bank ETF that tracks the CSI index has about $385 million under management, data compiled by Bloomberg show. Investors yanked more than $700 million from the ETF since the beginning of June amid a stock rout that’s erased more than a third of the Shanghai Composite Index’s value.

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Wednesday, September 30th, 2015 EN

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