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A new China bond ETF launched for the European market

China ETF specialist KraneShares has debuted a China-focused ETF for the European market. Listed on the London Stock Exchange with a TER (total expense ratio) of 0.35%, the KraneShares Bloomberg Barclays China Bond Inclusion UCITS ETF tracks the Bloomberg Barclays China Treasury and Policy Bank 9% Capped Index.

The index is designed to follow the Chinese onshore renminbi government and policy bank bond market. This follows the performance of bonds issued by both the Chinese Ministry of Finance and by banks owned by the Chinese government in China.

Jonathan Krane, CEO of KraneShares, said:

“With attractive yields and low correlations relative to other government bond markets, China fixed income represents a compelling opportunity.”

Bloomberg started tracking Chinese RMB-denominated government and policy bank securities as part of its global aggregate index in April 2019.

KraneShares has carved out a niche for itself as a specialist in China and emerging markets ETFs. This includes ETFs that are tracking specific sectors (e.g. internet and healthcare) and themes (the controversial Chinese One Belt, One Road strategy). The company has also launched ETFs on broader emerging markets investment themes, like healthcare and consumer technology.

Not all KraneShares products are available on European exchanges however, but more are being added all the time. In February the company launched its MSCI China ESG Leaders UCITS ETF (LSE: KESG) on the London Stock Exchange. This tracks a capitalisation-weighted index that provides exposure to companies with a high ESG (environmental, social, governance) rating relevant to sector peers.

KraneShares has observed that, as China’s economy moves from manufacturing to services, companies aligned with the ‘New China’ economy are seeing greater growth than companies within China’s legacy sectors.

KraneShares represent an opportunity for investors interested in tracking growth within China from different perspectives an easy way to buy and sell these strategies through a UK-listed ETF.

Stuart Fieldhouse, Editor

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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