Premia Partners lists Asia’s first USD-hedged China bond ETF

Aug 18th, 2022 | By | Category: Fixed Income

Premia Partners has rolled out a US dollar-hedged share class for the Premia China Treasury & Policy Bank Bond Long Duration ETF on the Stock Exchange of Hong Kong.

Rebecca Chua, Managing Partner of Premia Partners.

Rebecca Chua, Managing Partner of Premia Partners.

The ETF, which made its debut in April 2021, offers direct access to onshore Chinese Treasury and policy bank bonds situated at the far end of the yield curve.

The new USD-hedged share class, the first of its kind in Asia, trades under the ticker 9177 HK and comes with an expense ratio of 0.28%, the same price tag as the original unhedged share classes (HKD: 2817 HK; USD: 9817 HK; RMB: 82817 HK).

The ETF currently houses RMB 970 million (approx. $150m) in assets.

The fund is linked to the ICE 10+ Year China Government & Policy Bank Index which covers ultra-long-duration Treasury and policy bank bonds traded in onshore Chinese markets.

Chinese policy banks are responsible for financing economic and trade development as well as state-invested projects. They include the China Development Bank, Agricultural Development Bank, and Export-Import Bank of China.

To qualify for the index, a bond must be denominated in renminbi and have a fixed coupon schedule, a remaining maturity above ten years, and a minimum amount outstanding of RMB 10bn for sovereign and RMB 5bn for policy bank issuers. Constituents are weighted by market value.

Chinese government bonds currently have a stable A+/A1 credit rating. The index is exhibiting a yield to maturity of 3.2% with an effective duration of 16.8 years.

Distributions are sent to investors semi-annually.

Rebecca Chua, Managing Partner at Premia Partners, said: “Accessing Asia opportunities efficiently is always a topic close to our hearts at Premia. For us, it is not just about launching new products but also constantly updating features of our existing ETFs based on client feedback, for better and more relevant use cases. The USD-hedged unit class provides timely optionality for investors looking to maintain USD return during the current market environment.”

Magnus Cattan, Head of ICE Fixed Income & Data Services in the Asia Pacific, added: “We’ve been pleased to work with Premia on this innovative solution for ultra-long USD-hedged China government bonds, leveraging our industry-leading fixed income evaluated pricing capabilities. Several new ETF issuers have selected ICE’s indices, resulting in growth in exciting new areas including regional fixed income and equity, thematic, climate, and ESG ETFs in Asia.”

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