We have spent plenty of time recently talking about the surge in Emerging Markets based equities led particularly by China names, so it seems fitting that we allocate some airtime to the Chinese bond market via ETFs.
DSUM (PowerShares Chinese Yuan Dim Sum Bond Portfolio, Expense Ratio 0.46%) entered the marketplace about two years ago in late September of 2011, and has attracted about $79 million in assets under management since inception.
The fund averages a respectable 70,000 shares on an average daily basis and tracks the Citigroup Dim Sum (Offshore CNY) Bond Index, which “measures the performance of Chinese Yuan denominated “Dim Sum” bonds that are issued and settled outside of Mainland China.”
Duration in the portfolio is short-term, and current top underlying holdings include debt issued by the Chinese government, Air Liquide Finance SA, New World China Land Ltd., Global Logistic Properties Ltd., Victor Soar Ltd., America Movil SAB de CV, VTB Bank OJSC Via VTB Capital SA, and Bitronic Ltd.
A second, much smaller offering also exists in this space, CHLC (Market Vectors Renminbi Bond ETF, Expense Ratio 0.39%) which also debuted in late 2011 ($5.2 million in AUM).
One caveat that bears mentioning is that the Dim Sum bond market itself is far from mature, and thus underlying bond liquidity is not as robust as say, the U.S. Investment Grade Corporate market.
This said, the existence of DSUM and CHLC have helped to tighten spreads in the space and enable institutional managers to purchase baskets of these bonds via these ETF products, and carve a new allocation into existing portfolios that is laser focused on the Chinese bond market.
PowerShares Chinese Yuan Dim Sum Bond Portfolio
For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com.
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