China is too big to ignore, offering a deep and diverse pool of investment opportunities. Yet China remains under-owned by international investors, who risk missing out on the significant growth potential and diversification benefits that this vast and complex market provides.
Why we are looking at China fixed income
2021 has shown us how diverse various parts of the China fixed income market can be. While major developments such as a policy shift designed to promote long-term stability and reduce systemic risks have challenged some renminbi and onshore bonds, they have also given rise to exciting opportunities.
An evolving market
China’s bond market has grown rapidly and is now the world’s second largest. China fixed income allocation will continue to grow in broad indices, with different elements of the China fixed income universe increasing in size and significance.
Diversification benefits
Both onshore and offshore China bonds exhibit a lower correlation with global aggregate and developed market bonds when compared with those in emerging markets, presenting opportunities for relatively attractive risk-adjusted returns.
* Diversification does not guarantee investment returns and does not eliminate the risk of loss.
Compelling opportunities
China's bond market presents opportunities for higher yields compared with some developed markets. With a supportive monetary policy, China is likely to maintain domestic economic growth and a relatively stable exchange rate in our opinion.
Help standardize and simplify bond investing
Bond ETFs trade on exchange and provide transparent pricing. Bond ETFs can act as a price discovery tool, helping investors see how the value of a basket of bond securities may be changing in reaction to market movements.
Facilitate diversification and tactical portfolio allocations
For the price of one unit, investors can get access to a well-diversified fixed income portfolio. Bond ETFs also allow asset allocation decisions to be implemented quickly and efficiently. Investors can use ETFs to gain exposure to a wide range of bond markets.
* Diversification does not guarantee investment returns and does not eliminate the risk of loss.
Liquidity benefits compared to transacting directly in the underlying bond markets
The ETF secondary market is an additional liquidity venue through which to transact on-exchange or over the counter. In the case of larger bond ETFs, buyers and sellers are often able to transact at lower bid-ask spreads than through the primary market.
Our China ETF: Employing a passive, long-term approach
Strong quantitative research & investment team with a long track record managing systematic fixed income strategies
Portfolio constructed closely to track the Bloomberg Barclays China Treasury + Policy Bank + Liquidity China Credit Issuers Index
Targeting the “future state of inclusion”
OUR INSIGHTS
Guide to China
Access the main trends for the world’s second largest economy and what opportunities there are for your investments.
A century of China expertise
