BlackRock has expanded its iShares range with the launch of a China bond ETF.
The iShares China CNY Bond UCITS ETF (CNYB) is listed on Euronext Amsterdam and Xetra (ICGB) with a total expense ratio (TER) 0.35%. It is also due to be launched on the London Stock Exchange.
CNYB offers investors exposure to China-denominated investment-grade bonds issued by the Chinese treasury and policy banks.
Rebalanced monthly, CNYB is physically replicated and tracks the Bloomberg Barclays China Treasury + Policy Bank index.
It adopts a sampling methodology which means it only replicates a portion of the index, usually the most liquid stocks in order to remove the high costs of full replication.
This is the second China ETF BlackRock has launched in recent times after it listed the iShares MSCI China UCITS ETF (ICHN) on Euronext Amsterdam and Xetra towards the end of June.
ICHN offers investors exposure to approximately 85% of the Chinese stock market with a focus on large and mid-cap stocks. It tracks the MSCI China index and has a TER of 0.40%.
The launches follow MSCI's decision to include China A-Shares across its emerging market indices last year. Through a three-step process, MSCI is adding 26 China A-Shares to the MSCI China index resulting in an updated aggregate weight of 5.25%. Furthermore, 1.76% of the MSCI Emerging Markets indices will now be comprised of A-Shares.
Wei Li (pictured), head of iShares EMEA investment strategy at BlackRock, commented: "When it comes to the immense structural opportunity in China, think 2-2-2. With the 2nd largest stock and bond markets and only 2% foreign ownership, China is expected to attract $200bn in flows from this year’s inclusion events."
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Vasiliki Pachatouridi, head of iShares EMEA fixed income strategy at BlackRock, added: “The investment case for China is clear - it boasts the second largest bond market in the world, its bond yields are higher and bond return correlations lower compared to major developed countries.
“CNYB provides a single access point to China onshore bonds, offering investors ease of access and operational efficiency.”