Daily ETF Watch: China Bond Fund Launches

Global X launches a China bond ETF focused on mainland-Chinese credits.

Managing Editor
Reviewed by: Olly Ludwig
Edited by: Olly Ludwig

Global X, the New York-based ETF sponsor known for a variety of niche strategies, today launch is launching a new bond fund focused on mainland Chinese fixed-income securities. It’s the second bond ETF to focus on the big mainland fixed-income market.

The Global X GF China Bond ETF (CHNB) is a collection of renminbi-denominated securities issued by governments, agencies and state-owned enterprises with various maturities of at least one year, the prospectus said. The ETF is mining an underexploited and prospective piece of global investment markets; namely, mainland China. The first fund to target the space, the Market Vectors ChinaAMC China Bond ETF (CBON), launched last week.

Global X’s new fund has an annual expense ratio of 50 basis points, or $50 for each $10,000 invested, according to the fund’s latest updated prospectus. CBON, the pioneering fund from Market Vectors, also has an expense ratio of 50 basis points.

While gaining access to China’s big mainland market is a plus for investors seeking to maximize diversification, the finer points of access to Chinese investments remain challenging to the extent that foreign investors don’t yet enjoy unfettered access to Chinese fixed-income and equities.

For example, CHNB, the new Global X fund, will at times use over-the-counter swaps designed to mimic the exposure of bonds in the underlying index, the fund’s prospectus said. Swaps exposure introduces counterparty risk to the overall risk profile of the ETF.

For its part, it’s not totally clear at this time whether CBON, the fund from Market Vectors, will actually be able to own all the securities included in its index, as ETF.com analyst Howard Lee wrote in a recent blog appropriately titled “Issues With Innovative New China Bond ETF.”

Global X’s new fund has its primary listing on NYSE Arca.

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Olly Ludwig is the former managing editor of etf.com. Previously, he was a financial advisor at Morgan Stanley Smith Barney and an editor at Bloomberg News. Before that, Ludwig was a journalist at the Reuters News Agency in New York.