BlackRock cross-lists Chinese equity and bond ETFs on SIX Swiss Exchange

Oct 7th, 2019 | By | Category: Alternatives / Multi-Asset

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BlackRock has cross-listed two China-focused ETFs – one equity, one fixed income – on SIX Swiss Exchange.

BlackRock cross-lists China equity and bond ETFs on SIX Swiss

BlackRock has cross-listed two China-focused ETFs on Six Swiss Exchange.

The equity ETF provides broad exposure to multiple Chinese share classes, while the fixed income fund, targets renminbi-denominated government and policy bank bonds issued in China.

The iShares MSCI China UCITS ETF has been listed in US dollars under the ticker ICHN SW.

It is linked to the MSCI China Index which captures large- and mid-cap representation across China H shares, B shares, Red chips, P chips, and foreign listings.

With 447 constituents, the index covers about 85% of the China equity universe.

Large-cap China A shares are currently represented at 15% of their float-adjusted market capitalization. The inclusion factor of large-cap A shares in the index is expected to increase to 20% following MSCI’s November 2019 semi-annual review, while China A mid-cap shares, including eligible ChiNext shares, will also be included at a 20% inclusion factor.

The majority of the index’s exposure is concentrated within three sectors: information technology (37.6%), financials (22.0%), and consumer discretionary (8.9%). The next largest sector exposure is real estate (5.7%). Tencent and Alibaba both hold significant weights in the index at 15.4% and 12.6%, respectively, followed by China Construction Bank (5.3%) and Baidu (3.9%).

The ETF is already listed on Euronext Amsterdam in US dollars and Deutsche Börse’s Xetra in euros under the tickers ICHN NA and ICGA GY, respectively. It comes with an expense ratio of 0.40% and houses $12 billion in assets under management. Income is capitalised within the fund.

Fixed income

The iShares China CNY Bond UCITS ETF has been listed in US dollars under the ticker CNYB SW. It tracks the Bloomberg Barclays China Treasury + Policy Bank Index through physical replication using a stratified sampling technique.

The index reflects the performance of fixed-rate RMB-denominated treasury bonds and policy bank bonds listed on the China inter-bank bond market. Eligible securities must be rated investment grade and have a minimum of one year to maturity. The index currently contains over 300 bonds.

Nearly half (47.2%) of the index is allocated to bonds issued by the Chinese government, with the remaining weight assigned to bonds from China Development Bank, Agricultural Development Bank, and Export-Import Bank of China. These three policy banks are responsible for financing economic and trade development as well as state-invested projects.

The ETF may appeal to investors searching for increased yield without venturing into junk bond territory – the underlying index is currently yielding 3.2%. It can also serve as a portfolio diversifier with BlackRock noting that China bond yields have historically exhibited a near-zero correlation with developed countries’ government bonds.

The fund comes with moderate interest rate risk with the underlying index showing an effective duration of 5.5 years.

The ETF is also listed on Euronext Amsterdam in US dollars and on Xetra in euros under the tickers CNYB NA and ICGB GY, respectively. The fund has an expense ratio of 0.35% and houses $100m in AUM. Income is distributed to investors on a semi-annual basis.

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