Mirae Asset launches China policy bank bonds ETF in Hong Kong

Oct 19th, 2022 | By | Category: Fixed Income

Mirae Asset Global Investments has launched a new ETF in Hong Kong under its Global X brand, providing exposure to bonds issued by China’s major policy banks.

Mirae Asset launches China policy bank bond ETF in Hong Kong

The ETF provides exposure to bonds issued by China’s three major policy banks.

The Global X FTSE China Policy Bank Bond ETF (3041 HK) has been listed on the Stock Exchange of Hong Kong in Hong Kong dollars.

The fund tracks the FTSE Chinese Policy Bank Bond Index, covering fixed-rate, RMB-denominated bonds issued by three China’s three main policy banks – China Development Bank, the Agricultural Development Bank, and the Export-Import Bank of China – which are responsible for financing economic and trade development as well as state-invested projects.

Eligible securities must be traded in the China interbank bond market, be rated investment grade, and have remaining maturities greater than one year.

The fund may appeal to investors searching for increased yield without venturing into junk bond territory – as of the end of September, the index was yielding 2.65%.

The ETF may also serve as a portfolio diversifier as Chinese bond yields have historically exhibited a near-zero correlation with US, German, and Japanese government bonds.

The fund comes with moderate-to-low interest rate risk with the underlying index showing an effective duration of 4.64 years.

The ETF comes with an expense ratio of 0.30%. Portfolio income is distributed to investors on a semi-annual basis.

The fund is the first ETF in Hong Kong to provide targeted exposure to Chinese policy bank bonds from across the yield curve. Investors may, however, obtain access to shorter-term Chinese policy bank bonds through the iShares Short Duration China Policy Bank Bond ETF (HKD: 3125 HK; RMB: 83125 HK; USD: 9125 HK) which houses $30m and comes with an expense ratio of 0.20%.

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