SHANGHAI: The largest exchange-traded fund to invest purely in Chinese government bonds lists in Singapore next week, the bourse and the fund manager said on Thursday (Sep 17), capitalising on surging interest in the world's second-biggest bond market.
The first China bond ETF in Singapore, managed by CSOP Asset Management, will launch with an initial US$676 million drawn from both institutional and retail investors, CSOP and Singapore Exchange told a briefing.
Trading begins on Monday.
The launch comes as foreign investors stream into China's onshore yuan bonds and as it steps up efforts to deregulate its capital markets and promote global use of the yuan.
The ETF, which tracks the FTSE Chinese Government Bond Index, is designed to help capture "opportunities brought by the booming China onshore bond market and its continuous inclusion into the world's major global indices", said Ding Chen, CEO of CSOP Asset Management.
Chinese government bonds, which pay a premium over US government debt of more than 200 basis points at the ten-year tenor, are becoming increasingly popular with investors and drew a 21st consecutive month of inflows in August.
Foreigners hold about US$400 billion in the bonds.
Global index publisher FTSE Russell will announce a decision next week on whether to add the Chinese bonds to its global benchmark. Morgan Stanley put a 60 to 70 per cent chance on China being included, saying it could funnel US$60 billion to US$90 billion of foreign inflows in the next few years.
The launch of the ICBC CSOP FTSE Chinese Government Bond Index ETF also helps develop the offshore yuan market in Singapore and comes as the SGX competes with Hong Kong's exchange for business.
Retail brokers in Singapore said the fund could attract interest from customers seeking exposure to an asset class that professional investors think holds promise.
"The new ultimate safe haven of this decade will be Chinese government bonds," said Davis Hall, head of capital markets in Asia at Indosuez Wealth Management.