Daily ETF Watch: DB Plans China Bond Fund

Deutsche Bank, which launched a first-to-market equity fund focusing on actual mainland China stocks, has put into registration another China-focused ETF, this one targeting mainland-Chinese fixed-income securities.

The Deutsche X-trackers Harvest China Bond ETF will provide investors with exposure to bonds denominated in renminbi and issued or distributed within the mainland of the People’s Republic of China, according to the regulatory filing.

ETF industry sources view access to mainland China securities as the holy grail of investing, and issuers such as Deutsche Bank, Market Vectors and KraneShares have lined up a host of products looking to give investors direct exposure to the world’s second-largest economy.

The fund’s index includes China bonds of varying maturities, including bonds with a term-to-maturity of less than one year, and is composed of government bonds, financial bonds, corporate bonds, central bank notes and short-term notes traded in the interbank and exchanges market.

Deutsche Bank didn’t include the proposed fund’s ticker and annual expense ratio in the filing.

Euro ETF Asset Flows

Assets in ETFs linked to FTSE indexes have risen 31 percent in the run-up to the London Stock Exchange Group’s acquisition of Russell’s index business this year, ensuring the merger will make FTSE the third-largest ETF indexer in the world.

ETF assets tracking FTSE’s indexes have risen from $163 billion in June 2013 to $213 billion as of June this year, according to LSEG’s interim management statement from July 15.

LSEG announced last month it had agreed to purchase Russell’s index business for almost $2.7 billion in cash, making it the third-largest indexer in terms of ETF assets, behind S&P Dow Jones Indices and MSCI. Combined, Russell and FTSE will have $339 billion of ETF assets when they merge business models after September.

Other indexers have also seen phenomenal growth over the past year.

S&P’s ETF assets have also grown 31 percent between June 2013 and 2014, reaching $718.9 billion. MSCI, the second-largest global index provider, has risen 40 percent to $378.7 billion as of June 2014.

Mainstream equity benchmarks such as the FTSE 100, the S&P 500 and the MSCI World are heavily embedded in investors’ psyches as the preferred option for portfolios, and this is clearly reflected in the inflows and outflows of European ETF investors so far this year.