Investors have continued to pour money into BlackRock’s China bond ETF, which recorded inflows of $1.1bn in January, as the government increases its efforts to prop up its slowing economy.
The iShares China CNY Bond UCITS ETF (CNYB) now has over $13.6bn assets under management (AUM) after it saw inflows of $919m in the seven days to 1 February, according to data from Ultumus.
In a continuation of last year – where CNYB recorded inflows of roughly $5bn – investor demand for Chinese bonds has remained strong having generated impressive yield over the past 12 months despite fears over the country’s debt-laden property sector.
The government lowered its mortgage lending benchmark rates in January, with more cuts expected to follow, at the same time as the Federal Reserve looks set to tighten monetary policy several times over 2022.
Furthermore, investors have been lured in by the strong performance in a market where yield has been difficult to come by.
Source: Bloomberg Intelligence
Athanasios Psarofagis, ETF analyst at Bloomberg, said investors have continued to be drawn to CNYB after generating impressive performance.
“CNYB was one of BlackRock’s top-selling ETFs last year based on a strong performance and yield that was absent from Chinese equities,” he said.
The ETF posted returns of 8.2% in 2021 versus -2.5% of the iShares $ Treasury Bond UCITS ETF (GOVT), while year-to-date CNYB has returned 0.9% versus -1.8% for GOVT.
Performance has also been strong compared to China equities over 2021 after the iShares MSCI China A UCITS ETF returned (CNYA) 2.8% last year.
Last week, JP Morgan highlighted Chinese government bonds as an area that could offer investors a “substantial return premium” over developed markets as well as low correlations.
CNYB has proved so popular for European investors that last week BlackRock filed for a China bond ETF in the US.
Demand for China government bonds also played out in $1.9bn iShares China CNY Govt Bond UCITS ETF (CGBI) which hit $1bn AUM just four months after it launched in April 2021.