A Hong Kong-listed Chinese onshore bond fund saw its size jump 10-fold over the past month on strong money inflows, according to its asset manager, underscoring growing foreign interest in the world’s second-biggest bond market.
The CSOP Bloomberg China Treasury + Policy Bank Bond Index ETF saw its asset under management (AUM) increase to more than 5 billion yuan ($784.61 million), after attracting “sizable” investments from institutional investors, CSOP Asset Management Ltd commented in a statement.
The yuan-denominated bond ETF “helps further enrich the RMB (yuan) product range in Hong Kong to meet international investors’ demand for RMB asset allocation,” Gao Ming, chairman and executive director of ICBC (Asia), whose asset management unit is an adviser to the ETF, said in the statement.
Reuters state that “an official from the company said net flows in the past month alone exceeded 4.5 billion yuan. Listed as early as February 2014, the ETF has achieved returns of 30.54%.”
The AUM explosion in CSOP’s China bond ETF comes as FTSE Russell started last month to include Chinese government bonds to its flagship global index.
It also comes as China successfully sold offshore sovereign bonds in Hong Kong recently, highlighting foreign confidence in China despite its economic slowdown, and the country’s real estate debt troubles that roiled Chinese dollar bond market.
Reuters go on to comment that “the spread between China’s 10-year treasury bonds and their U.S. counterparts has narrowed over the past year, but remains attractive to yield-seeking global investors, at around 1.3 percentage points.”
“The China onshore bonds offer a higher yield with a relatively lower exchange rate volatility compared to other major economies,” CSOP Asset Management said in the statement.
“In addition, the low correlation between China onshore bonds and global bonds would potentially provide greater portfolio diversification for investors.”
Foreign investors and Fund Selectors, held Chinese government bonds worth a total of 2.3 trillion yuan at the end of October, the highest level on record and up 1.06% from a month earlier.
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