BlackRock launches two China bond ETFs in Hong Kong

Oct 21st, 2021 | By | Category: Fixed Income

BlackRock has launched two new fixed income ETFs in Hong Kong providing exposure to renminbi-denominated government and policy bank bonds issued in China.

BlackRock launches two China bond ETFs in Hong Kong

Chinese bonds are supported by ongoing index inclusion programs.

The iShares China Government Bond ETF (HKD: 2829; RMB: 82829; USD: 9829) and iShares Short Duration China Policy Bank Bond ETF (HKD: 3125; RMB: 83125; USD: 9125) have been listed on the Stock Exchange of Hong Kong with management fees of 0.18% and 0.20%, respectively.

The ETFs may appeal to investors searching for increased yield without venturing into junk bond territory. They may also serve as portfolio diversifiers as Chinese bond yields have historically exhibited a near-zero correlation with US, German, and Japanese government bonds.

Chinese bonds are also supported by ongoing index inclusion programs, with onshore Treasury bonds having been included in the Bloomberg Global Aggregate Bond Index and Bloomberg Emerging Market Local Currency Government Index since 2019, and the JP Morgan GBI Emerging Market Index family since 2020.

The iShares China Government Bond ETF tracks the FTSE Chinese Government Bond CNY Index which measures the performance of fixed-rate government bonds issued in mainland China that have a minimum time to maturity of one year.

The iShares Short Duration China Policy Bank Bond ETF, meanwhile, is linked to the FTSE Chinese Policy Bank Bond 6 Months – 3 Years Index. The index consists of fixed-rate and zero-coupon bonds with remaining maturities between six months and three years that have been issued by the China Development Bank, the Agricultural Development Bank of China, or the Export-Import Bank of China.

These policy banks are state-owned and their objectives typically include providing social benefit, stimulating the economy, and supporting growing local industries.

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