db X-trackers Launches Europe’s First China Govt Bond ETF

The fund listed in Germany today and costs 0.55 percent in annual fees

Editor, etf.com Europe
Reviewed by: Rachael Revesz
Edited by: Rachael Revesz

db X-trackers has launched Europe’s first exchange traded fund (ETF) to invest in Chinese sovereign bonds with annual fees of 0.55 percent.

The db X-trackers II Harvest CSI Sovereign Bond UCITS ETF is physically replicated, and the underlying strategy and foreign investor quota is provided by the firm’s partner, Harvest Global Investments.

It tracks the CSI Gilt-Edged Medium Term Treasury Note Index, which is made up of 35 Renminbi-denominated bonds that are traded in Shanghai, Shenzhen and China’s interbank bond market. The average duration of the bonds is five years and the ETF has a yield to maturity of around 3.3 percent. It listed in Germany today and will list on the London Stock Exchange on 20 July.

“China’s domestic sovereign bonds provide a high yield relative to equivalent sovereign bonds of countries with similar credit ratings, so we anticipate demand for this ETF should be high,” said Marco Montanari, Deutsche Asset & Wealth Management’s (DeAWM) head of passive investments, Asia-Pacific. “Investors will also be interested in the historically low correlation China’s domestic sovereign debt has to international fixed income and equity markets.”

DeAWM also launched one of the first physically replicated China A-shares ETFs in Europe in partnership with Harvest Global Investments in January 2014. The provider slashed annual fees on this fund from 1.1 percent to 0.65 percent in May.

Interest in Chinese fixed income funds is heating up as Commerzbank also brought to market Europe’s first ETF to use foreign quota scheme to invest in Chinese money market instruments, and domiciled the fund in the UK, a first for the country, in March this year.

Rachael Revesz joined etf.com in August 2013 as staff writer. Previously an investment reporter at Citywire, she has a background in writing content for retail financial advisors and has covered a wide range of subjects in finance. Revesz studied journalism at PMA Media, which has since merged with the Press Association. She also holds a B.A. in modern languages from Durham University, as well as CF1 and CF2 financial planning certificates from the CII.