Van Eck Global today launched the Market Vectors ChinaAMC China Bond ETF (CBON), a product that invests across the fixed-income spectrum in mainland China.
The fund, which trades on the NYSE Arca exchange, tracks the ChinaBond China High Quality Bond Index comprised of fixed-rate, Renminbi (RMB)-denominated bonds issued in the People’s Republic of China by Chinese credit, governmental and quasi-governmental issuers. As of November 10, 2014, the index’s yield to maturity was 4.1%.
The index is constructed by China Central Depository & Clearing Co. Ltd., which is based in Beijing.
According to Van Eck, the fund’s selling points are that it provides access to the world’s largest emerging markets bond market, has attractive yields and low correlation in relation to developed bond markets, and is sub-advised by ChinaAMC (Hong Kong), one of China’s largest asset managers.
As the CBON fund's sub-advisor, ChinaAMC uses a Renminbi-Qualified Foreign Institutional Investor (RQFII) quota that it has received to gain access to this market on behalf of foreign investors. CBON is the third ETF partnership between Market Vectors and ChinaAMC––the other two are the Market Vectors ChinaAMC A-Share ETF (PEK) and the Market Vectors ChinaAMC SME-ChiNext ETF (CNXT).
The former tracks an index of 300 China A-Share stocks of mainland-based companies that trade on Chinese stock exchanges and typically are available only to Chinese citizens. The latter also involves China A-Share companies and tracks an index of the 100 largest and most liquid stocks listed and trading on the Small and Medium Enterprise (SME) Board and the ChiNext Board of the Shenzhen Stock Exchange.
The CBON ETF’s net expense ratio is capped at 0.50 percent until September 1, 2016.