Daily ETF Watch: China Bond Fund Nears

Global X, the New York-based ETF sponsor known for a variety of niche strategies, this week plans to launch a bond fund focused on mainland Chinese fixed-income securities, though in the initial stages, some of the exposure may be obtained indirectly via swaps. It’s only the second such ETF on the U.S. market.

The Global X GF China Bond ETF will trade with the ticker “CHNB” and have an annual expense ratio of 50 basis points, or $50 for each $10,000 invested, according to the fund’s latest updated prospectus. The fund is mining what is widely considered an underexploited and prospective piece of global investment markets, namely mainland China.

As noted, CHNB is the second bond fund to launch that is focused on renminbi-denominated debt—it followed the pioneer in the space, the Market Vectors ChinaAMC China Bond ETF (CBON), by one week. Although gaining access to China’s big mainland market is a plus, the finer points of that access remain at times thorny. CBON, by the way, also has an annual expense ratio of 50 basis points.

CHNB will at times use over-the-counter swaps designed to mimic the exposure of bonds in the underlying index—a collection of renminbi-denominated securities issued by governments, agencies and state-owned enterprises, the prospectus said. The swaps exposure introduces counterparty risk to the overall risk profile of the ETF.

The new fund will have its primary listing on NYSE Arca.

SSgA Buyback ETF In The Works

Separately, State Street Global Advisors, the fund sponsor behind the world’s first and now 10-year-old physical gold ETF, the SPDR Gold Shares (GLD | A-100), filed regulatory paperwork detailing a proposed equity ETF that cherry-picks S&P 500 stocks based on share buybacks.

The SPDR S&P 500 Buyback ETF is based on an index that provides exposure to the 100 constituent companies in the S&P 500 Index with the highest buyback ratio in the past 12 months. Stocks in the fund are equally weighted and the index is rebalanced quarterly, according to the ETF’s preliminary prospectus.

A “buyback” occurs when a company buys back its own shares from the marketplace, reducing the number of shares outstanding, which can help boost share prices of the underlying constituents and of funds that aggregate such securities around a buyback theme.

The fund will join a small but growing field of buyback-focused ETFs, the biggest of which is the PowerShares Buyback Achievers Portfolio (PKW | A-93), a U.S.-focused fund with $2.7 billion in assets under management that’s designed around the Nasdaq Buyback Achievers Index. PKW has an annual expense ratio of 71 basis points.

In its preliminary prospectus, SSgA didn’t include a ticker for the SPDR S&P 500 Buyback ETF, nor did it say how much its expense ratio might be. But it did say the fund would have its primary listing on NYSE Arca.