Currently, only foreign institutional (rather than retail) investors can invest directly in Chinese government bonds, the mechanisms of which are discussed here. However, individual investors can gain exposure to Chinese government bonds through various ETFs, including BlackRock's iShares CNYB (explained here) or the ICBC CSOP FTSE Chinese Government Bond Index ETF, which is the topic of this article.
An introduction to China's fixed income markets is also provided here.
***An ETF, or exchange-traded fund, is similar to a mutual fund. ETFs trade throughout the day on exchanges and are typically passively managed investment options.
For further information, please refer to the fund's website.
The ICBC CSOP FTSE Chinese Government Bond Index ETF was launched in 2020 as the world's largest Chinese pure government bond ETF with US$676 million (approximately RMB4.6 billion) in AUM. The fund is managed by CSOP Asset Management and developed in partnership with ICBC Wealth Management and ICBC Asset Management as investment advisors.
The fund aims to track the performance of the FTSE Chinese Government Bond Index (CGBI), which is constituted of fixed-rate onshore Chinese government bonds.
Note: the primary difference between BlackRock's iShares CNYB and the ICBC CSOP FTSE Chinese Government Bond Index ETF is that the former invests in Chinese Treasury bonds issued by the Ministry of Finance of the People's Republic of China, as well as debt issued by Chinese policy banks. The latter exclusively invests in sovereign (i.e. Treasury) bonds.
The ETF offers dual currency trading in US dollars and Singapore dollars, and is listed on the Singapore Stock Exchange.
As of November 26th, 2020, the fund has a total net asset value worth RMB7.12 billion (approximately USD1.08 billion) with 48 holdings, all of which are Chinese sovereign bonds. The fund has an average weighted maturity of 7.40 years, with a breakdown of holdings by bond tenor as shown below.
Due to the recency of this fund, performance data is not yet available. Please refer to the fund's website for further updates.
China's Macroeconomy and Policy Developments
The Governor of the People's Bank of China has recently published an article concerning the direction of China's future financial policies, including the intention to pursue traditional monetary policy without the use of quantitative easing or negative interest rates, as well as the aim to maintain a stable value for the yuan. The plan to allow market forces to play a bigger role as part of further reforms in the financial markets was also mentioned, in addition to the government decision to expand the opening up of China's markets to foreign investors. Further information can be found here.
Our view is that this article is good news to those interested in investing in China. Maintaining normal monetary policy with a stable foreign exchange rate for the Renminbi boosts the attractiveness of yuan-denominated assets, while also shielding investors from exchange rate risk to some extent. The capital market reforms are predicted to attract more high-quality Chinese companies that would have otherwise sought out funding abroad, and the opening up of domestic markets will allow foreign investors to access a more diversified range of investment opportunities in China.
Investing in Chinese Government Bonds (Individual and Institutional Investors):
Investing in Chinese Government Bonds (Institutional Investors Only):
More on Investing in China (Equities):
Glossary of All China-Related Terminology:
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Disclaimer: this is not a sponsored post and we don't hold ICBC CSOP FTSE Chinese Government Bond Index ETF at the time of writing. Our website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company or security. Any individual who chooses to invest in any securities should do so with caution.