NYSE-listed ETF offers exposure to Pakistani stocks

US-based investors can now have ‘concentrated exposure’ to Pakistani stocks through Asian Growth Cubs Exchange-Traded Fund (ETF), the first-ever active and thematic ETF recently listed on the New York Stock Exchange (NYSE).

“It’s the only ETF in the world with concentrated, dedicated exposure to Pakistan in size. Therefore, it’s the only viable and liquid way for foreign investors to access the Pakistani stock market,” said Maurits Pot, founder and CEO of Dawn Global, investment manager for the emerging market ETF.

An ETF is a basket of different shares that investors can buy and sell in an exchange like a single stock.

At least 46 US-listed ETFs offer some exposure to Pakistani stocks, according to ETF Database, an independent website that collects and disseminates latest ETF-related information. But all other US-listed ETFs with constituents from Pakistan are passive funds and assign extremely low weights to the constituents from the South Asian economy.

Launched on June 17, Asian Growth Cubs ETF has 43 holdings from the five large but “historically difficult-to-access” equity markets of Bangladesh, Indonesia, Pakistan, Philippines and Vietnam. Its investment portfolio has a concentration of stocks from technology, media, telecom, healthcare, fast-moving consumer goods and the financial sector.

Four Pakistani firms — Systems Ltd, Meezan Bank, Lucky Cement and The Searle Company — are part of the ETF, which has a median market capitalisation of $2 billion. The Pakistani stocks collectively represent eight per cent of the ETF’s net asset value. The investment manager reviews the portfolio on a quarterly basis.

“If you look at other internationally listed ETFs with Pakistan exposure, this is up to five basis points (0.05pc). In Asian Growth Cubs ETF, the Pakistan weight is 800 basis points (8pc),” Mr Pot said.

As for the Pakistan-specific ETF by Global X that allocates a high weight to local stocks, he said the fund is passive and has not scaled beyond $25 million of assets under management despite being listed for over six years.

Active thematic shares have a roughly 5pc share in the global ETF industry’s AUM of $5 trillion. Such funds constitute the fastest-growing segment within ETFs, albeit from a low base, he added.

Being an active ETF, Asian Growth Cubs doesn’t track any benchmark. Its daily traded volume is more than 10,000 units which, according to the Dawn Global CEO, is in line with market expectations.

The list price of the ETF appreciated from $25 a unit two weeks ago to $25.61 at the end of June 30.