Van Eck Global is rolling out a new exchange traded fund (ETF) that allows U.S. investors access to the Chinese onshore bond market. Market Vectors ChinaAMC China Bond ETF (NYSEMKT: CBON) is the first U.S. listed ETF of its kind to allow investors this access.
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The ETF seeks to invest in all major segments of the Chinese fixed income markets, including sovereigns, policy banks and high-rated corporate bonds. It is the latest China-focused ETF to join the Market Vectors family. The firm had earlier launched the first ETF to provide exposure to A-shares in the United States, the Market Vectors ChinaAMC A-Share ETF (NYSEMKT: PEK), as well as an innovative ETF that provides exposure to non-government owned companies in China, the Market Vectors ChinaAMC SME-ChiNext ETF (NYSEMKT: CNXT).
Senior Investment Officer for Market Vectors ETFs, Fran Rodilosso, said:
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.
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Rodilosso would go on to state that China is currently the largest emerging markets bond market, but investors who are not in mainland China have been mostly excluded from it. Also China’s onshore bond market has had historically low correlation to core asset classes and has delivered attractive yields in comparison to developed bond markets in recent years.
The ETF looks to emulate as closely as possible the price and yield performance of the ChinaBond China High Quality Bond Index before fees and expenses. It has a gross expense ratio of 0.57% and a net expense ratio of 0.50%, which is capped contractually until September 2016. The cap excludes certain expenses such as interest.
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