Van Eck Introduces Chinese Renminibi Bond ETF

Van Eck, the sixth-largest U.S. ETF issuer, introduced the Market Vectors Chinese Renminibi Bond ETF

today becoming the latest ETF sponsor to tap into a the surging popularity of bonds denominated in China's local currency. In recent weeks, Guggenheim has rolled out the Guggenheim Yuan Bond ETF

and PowerShares introduced the PowerShares Chinese Yuan Dim Sum Portfolio

. The Market Vectors Chinese Renminibi Bond ETF will track the Market Vectors Chinese Renminibi Bond Index, which only includes bonds from issuers with investment grade ratings. The new ETF will have an expense ratio of 0.39% and rebalance monthly as well as make distributions monthly. Roughly 65% of CHLC's holdings are rated A/A to Aa/AA. CHLC is home to 45 issues with an average coupon of 2.13%, average years to maturity of 2.91 and average modified duration of 2.75%. Roughly 38.1% of the new ETF's holdings will be corporate issues. Another 37.6% are bank issues and government bonds account for 22.5% of the new ETF's weight. China and Hong Kong combine for over 79% of CHLC's country weight while the U.S., Germany and Singapore round out the top-five county allocations. While other ETFs focusing on non-dollar denominated emerging markets bond issues have proven popular with investors, the rush to add yuan bond ETFs underscores the investment case that the Chinese currency is undervalued relative to China's booming economy. “Given China's recent rapid economic growth, a market consensus has developed that the country's currency is undervalued,” Van Eck's managing director of ETFs Adam Phillips said in a statement. “Yet, investors have historically been somewhat limited in the ways by which they could get investment exposure to Chinese currency.” As Van Eck noted, over $230 billion in yuan denominated bonds have been issued since 2007, highlighting robust demand for these issues. Van Eck had 36 ETFs with almost $21.5 billion in assets under management at the end of September, according to data from the National Stock Exchange.