U.S. fixed income investors are finding it more difficult to find yield nowadays with the Federal Reserve pledging to keep rates near zero through 2022. One area of opportunity they may have not considered yet is China bonds.
Per a Funds Europe article, “JP Morgan Asset Management (JPMAM) has unveiled a strategy it says aims to capture cross-border opportunities in China’s bond market. The China Bond Opportunities Fund, available to international investors, seeks to provide diversified access to China’s ‘vast’ fixed income market.
“The current low or even zero interest rate environment across developed markets has made it more challenging for investors to find yield opportunities, making the income potential of China bonds more appealing,” said Elisa Ng, head of China and Hong Kong Funds at JPMAM.
Here are a pair of China-focused bond exchange-traded funds (ETFs) fixed income investors can consider:
- VanEck Vectors ChinaAMC China Bond ETF (CBON): seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the ChinaBond China High Quality Bond Index. The fund normally invests at least 80% of its total assets in securities that comprise the fund’s benchmark index. The index is comprised of fixed-rate, Renminbi (“RMB”)-denominated bonds issued in the People’s Republic of China (“China” or the “PRC”) by Chinese credit, governmental and quasi-governmental (e.g., policy banks) issuers (“RMB Bonds”).
- KraneShares CCBS China Corporate High Yield Bond USD Index ETF (KCCB): seeks to provide investment results that, before fees and expenses, track the price and yield performance of a specific fixed income securities index. The fund’s current index is the Solactive USD China Corporate High Yield Bond Index. Under normal circumstances, the fund will invest at least 80% of its total assets in components of the underlying index and to-be-announced transactions representing such components. The underlying index seeks to track the performance of outstanding high yield debt securities denominated in U.S. dollars issued by Chinese companies.
Investors contemplating a high yield option can take a look at the Goldman Sachs Access High Yield Corporate Bond ETF (GHYB). GHYB seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the FTSE Goldman Sachs High Yield Corporate Bond Index.
The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of high yield corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.
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