New China Bond ETFs

Global X Funds, one of the leading providers of niche ETFs, launched the newest addition to its array of products. The Global X GF China Bond ETF CHNB is a bond ETF focused on Mainland Chinese fixed-income securities. The ETF joins the Market Vectors ChinaAMC China Bond ETF CBON, which launched just last week.

Global X GF China Bond ETF

CHNB is weighted across three bond classes that include central, state-owned bonds that will be the most heavily weighted at 45 percent, followed by agency bonds with a 32 percent allocation and government bonds make will make up 23 percent of the ETF.

The ETF will pay a monthly dividend that is yet to be determined. The net expense ratio is 0.50 percent.

Related Link: Global X Launches Two New Rules-Based ETFs

Market Vectors ChinaAMC China Bond ETF

CBON consists of 24 bonds that are spread across eight sectors with financials at 36 percent, government bonds at 19 percent and energy at 13 percent.

The ETF is much like CHNB with regards to its exposure to the one largest bond markets in the world. The ETF company expects that CBON will also pay monthly dividends. The net expense ratio is 0.50 percent.

Chinese Bond Market

Until recently, mainland China’s fixed income market had been largely inaccessible to foreign investors due to investment restrictions. China’s mainland bond market is more than 40 times larger than Hong Kong’s market. Valued at nearly $5 trillion, the Chinese bond market is the third largest bond market in the world.

The Yuan

Another unique characteristic of the two new ETFs is that they provide exposure to the domestic Chinese currency, the Yuan. The currency has appreciated over 11 percent versus the dollar since 2010. In the end, the ETF provides diversity to a portfolio due to its exposure to Mainland China, the exposure to the Yuan, as well as a portfolio of fixed income securities that will provide monthly income.

Because the ETFs are new to the market and will likely have low volume turnover in the beginning, it is always a good idea to watch how they trade for a couple weeks before making any investment decisions.