Krane Funds Advisors, LLC, (KraneShares), a global asset management firm known for its China-focused exchange-traded funds (ETFs) and innovative China investment strategies, has launched the KraneShares Bloomberg Barclays China Bond Inclusion ETF (Ticker: KBND).
KBND offers investors access to RMB-denominated securities included in the Bloomberg Barclays Global Aggregate Index, an index with trillions of dollars in assets estimated to be passively tracking or actively managed against it. In December 2020, Bloomberg Barclays completed the process of including Chinese RMB-denominated securities within the benchmark.
Analysts estimated the inclusion drove over USD150 billion of new money into China’s onshore bond market and greatly expanded the universe of international investors participating in the market. KBND is the first US-listed ETF to track the Bloomberg Barclays China Inclusion Focused Bond Index, which covers issuers in China included within the Bloomberg Barclays Global Aggregate Index with ratings from international rating agencies.
China’s USD17 trillion bond market is the second largest in the world. Yields on China’s government bonds are significantly higher than government bond yields in many developed markets. China has an A+ sovereign credit rating and 10-year government bond yield comfortably above 3 per cent. China’s government, government-related, and investment-grade bond market can provide attractive yields at a sovereign risk level on par with Japan. Additionally, China’s government bonds were a source of stability during the global pandemic, and China’s currency was among the least volatile in emerging Asia in 2020.
“With attractive yields, low correlations, low sovereign risk, and ratings from international agencies, we believe China’s bond market presents a compelling opportunity,” says Jonathan Krane, CEO of KraneShares. “We are proud to partner with Bloomberg on KBND to bring new access to China’s fixed income market to our clients.”
“The inclusion of RMB-denominated bonds in Bloomberg’s fixed income indexes is a significant development for China’s integration with global financial markets,” Steve Berkley, CEO of Bloomberg Index Services Limited (BISL), explains. “We are excited to partner with KraneShares to make the Bloomberg Barclays China Inclusion Focused Bond Index investable through KBND.”
The launch was achieved through converting and renaming the existing KraneShares E Fund China Commercial Paper ETF (Ticker: KCNY). Effective June 4, 2021, the Fund tracks the Bloomberg Barclays China Inclusion Focused Bond Index.