Get Core Bond Exposure in China as Issuance Rises

The amount of debt issuance in China is increasing, which opens avenues for getting core exposure to the Chinese bond market. One fund to look at is the the KraneShares Bloomberg China Bond Inclusion Index ETF (KBND).

As the country slowly sloughs off its economic challenges, getting bond exposure to China presents an opportunity for value-oriented investors. As central banks get inflation under control and begin decreasing the pace of rate hikes, this could also be an ideal time to get Chinese bond exposure.

“Bond issuances in China totaled 5.47 trillion yuan (about 800 billion U.S. dollars) in February, data from the central bank showed,” a Xinhuanet article reported. “Treasury bond issuances amounted to 673 billion yuan, while local government bond issuances stood at 576.14 billion yuan, according to the People’s Bank of China.”

“By the end of February, outstanding bonds held in custody were at 146.4 trillion yuan, central bank data showed,” the report added further.

With bond issuance increasing, it could signal that the economy could be headed in the right direction after the aforementioned economic challenges. For the past few years, China has had to deal with a real estate development crisis, stricter regulations on internet companies, and a resurgence in Covid-19 cases to name a few.

Get Core Bond Exposure to China

KBND offers investors an ideal option to diversify their bond portfolios. With different countries in various stages of their economic cycles, getting bond exposure outside domestic regions can add that extra touch of diversity.

As for KBND, the fund is benchmarked to the Bloomberg China Inclusion Focused Bond Index, which is designed to track the performance of China’s onshore renminbi-denominated bond market. Investors get this exposure with its 0.68% gross and 0.48% net expense ratio.

Overall features of KBND include:

  • Investments in government bonds and high-quality corporate bonds. The fund attempts to provide attractive yields relative to other government and investment grade bond markets with a monthly distribution. As of March 23, its 30-day SEC yield is 1.7%.
  • Access to the securities included in Bloomberg broad fixed income indexes and investment opportunities within the second largest bond market in the world.
  • Low correlations to other major bond markets for more varied fixed income portfolios.

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