The rapidly growing lineup of exchange traded funds offering exposure to China’s vast renminbi-issued onshore bond market gains another entrant Tuesday with the debut of the KraneShares E Fund China Commercial Paper ETF (NYSEArca; KCNY).
KCNY tracks the CSI Diversified High Grade Commercial Paper Unhedged Index. Commercial paper held by the new ETF is investment-grade and “has a remaining term to final maturity of no more than one year and no less than one month,” according to KraneShares. The new ETF’s average maturity is just 128 days.
As has been the case with China’s A-shares equity markets, the country’s enormous onshore bond market has been hard to access for most foreign investors. However, as is the case when it comes to A-shares equity ETFs, issuers are racing to launch Chinese onshore bond ETFs. [New China Bond ETF Comes to Town]
KCNY is the third China onshore bond ETF to debut in the U.S. in less than a month, following the Market Vectors ChinaAMC China Bond ETF (NYSEArca: CBON) and the Global X GF China Bond ETF (NYSEArca: CHNB).
Like its rivals, the new KraneShares offering holds sovereign debt, quasi-sovereigns and corporate debt. The allure of Chinese corporate is understandable. 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. [Good Timing for China Bond ETFs]