China Onshore Bond ETF Race Heats Up

“Until recently, foreign investors were largely limited to Chinese dim sum bonds, which are issued outside of mainland China and do not provide true access to China’s debt market. In contrast, the Global X GF China Bond ETF will only hold Chinese yuan-denominated debt issued in mainland China, accessing a debt market currently valued at approximately $4.5 trillion. Following the US and Japan, the country’s local currency debt market is the 3rd largest in the world,” according to a statement issued by Global X.

CHNB allocates 45% of its weight to bonds issued by state-owned enterprises, 32% to policy bank notes and 23% to government debt. S&P mandates that issues from central state-owned enterprises included in CHNB’s index carry an AAA rating from at least on of China’s major ratings agencies.

The new ETF was seeded with $27 million, an impressive sum for a new fund. CHNB will compete directly with the Market Vectors ChinaAMC China Bond ETF (NYSEArca: CBON), which debuted last week. [New China Bond ETF Debuts]

“Global holdings of China’s onshore bonds climbed 59 percent this year as the central bank loosened monetary policy to counter an economic slowdown. The nation’s sovereign bonds handed investors an average return of 11.3 percent, trailing only India’s performance,” according to Bloomberg.

ETF Trends editorial team contributed to this post.