CSOP’s Chinese bond ETF surges 10-fold amid robust inflow of foreign capital

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SHANGHAI (Reuters) – A Chinese onshore bond fund listed in Hong Kong saw its size increase tenfold over the past month thanks to large inflows of money, its asset manager said on Tuesday, highlighting the interest growing number of foreigners for the world’s second largest bond market.

FILE PHOTO: Euro, Hong Kong dollar, US dollar, Japanese yen, Pound and 100 Chinese yuan banknotes are seen in this illustration, January 21, 2016. REUTERS / Jason Lee / Illustration

The CSOP Bloomberg China Treasury + Policy Bank Bond Index ETF saw its assets under management (AUM) reach more than 5 billion yuan ($ 784.61 million), after attracting “significant” investments from institutional investors, CSOP Asset Management Ltd said in a statement.

Yuan-denominated bond ETF “helps further enrich the RMB (yuan) product line in Hong Kong to meet international investor demand for RMB asset allocation,” Gao Ming, Chairman and CEO of ICBC (Asia), whose asset management unit is an ETF adviser, said in the statement.

Separately, a company official said last month’s net flows alone exceeded 4.5 billion yuan.

Listed in February 2014, the ETF achieved returns of 30.54%, the company said in the statement.

The explosion in assets under management of CSOP’s Chinese Bond ETF comes as FTSE Russell began including Chinese government bonds in its flagship global index last month.

It also comes as China recently successfully sold offshore sovereign bonds to Hong Kong, underscoring foreign confidence in China despite its economic slowdown and the country’s real estate debt issues that have disrupted the Chinese dollar bond market.

The spread between Chinese 10-year Treasuries and their US counterparts has narrowed over the past year, but remains attractive to global investors looking for yield, at around 1.3 percentage points.

“Chinese onshore bonds offer higher yield with relatively lower exchange rate volatility compared to other major economies,” CSOP Asset Management said in the statement.

“In addition, the low correlation between Chinese onshore bonds and global bonds would potentially offer greater portfolio diversification to investors.”

Foreign investors 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 the previous month.

($ 1 = 6.3726 yuan)

Reporting by Samuel Shen and Andrew Galbraith; Editing by Jacqueline Wong


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