“China’s domestic bond market is expanding and evolving at the same time. While the full liberalization of the markets is likely to take a long time, movement towards greater access for borrowers and lenders, and a higher degree of market oriented financings such as bond issuance have already greatly broadened the opportunity set for local investors,” said Fran Rodilosso, senior investment officer for Market Vectors ETFs, in a statement. [Van Eck Launches First China Onshore Bond ETF]
Not only is China the world’s third-largest bond market, but its $1.5 trillion corporate bond market is the world’s largest. Chinese companies are expected to absorb a third of global corporate debt needs over the next five years, indicating there could be a robust appetite for ETFs offering exposure to the country’s local commercial paper.
ETFs such as CBON and CHNB could also be favored by global investors not only because of attractive yields, but also because China’s bonds have historically shown low correlations to other fixed income assets.
CBON Holdings
Table Courtesy: Van Eck Global/Market Vectors