TLTE’s upside has been bolstered by the temerity of Chinese banks, of which three are found among the ETF’s top 10 holdings.
That bullishness has been accrued against the backdrop of dividend cuts from Chinese banks. Amid rising bad debt, three of China’s four largest banks earlier this month announced payout cuts with one, China Citic Bank Corp., scrapping its dividend altogether, according to Bloomberg. [EM Dividend ETF Bounces Back]
Add to that, pay cuts and restrictions have sparked a spate of executive departures at the Bank of China, Bank of Communications, and China Construction Bank, among others.
Remember, the “tilt” in TLTE is away from large-caps and towards higher allocations to mid- and small-caps than are seen in most diversified emerging markets ETFs. That strategy has proven advantageous in years in which state-controlled firms have been laggards. Since inception, TLTE’s underlying index has outpaced the MSCI Emerging Markets Index by nearly 70 basis points, according to FlexShares data.
FlexShares Morningstar Emerging Markets Factor Tilt Index Fund