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发帖数: 40 | 1 ETF.COM ANALYST BLOGS New China ‘Paper’ ETF A Groundbreaker By Dennis
Hudachek | December 04, 2014 Related ETFs: CBON | CHNB Share:
http://www.etf.com/sections/blog/23967-new-china-paper-etf-a-gr
On Wednesday, China ETF specialist KraneShares brought to market one of the
more innovative ETF launches I’ve seen in years.
The new KraneShares E Fund China Commercial Paper ETF (KCNY) tackles a
specific niche within China’s massive $5 trillion “onshore” bond market:
commercial paper.
KCNY breaks new ground because it’s not only the first China commercial
paper ETF, it’s the first U.S.-listed commercial paper ETF, period. There
is currently no other ETF focused exclusively on commercial paper.
The fund tracks an index of “investment grade,” ultra-short-term Chinese
sovereign and corporate debt that yields north of 4 percent. KraneShares
said in regulatory paperwork that the fund’s average maturity is only 128
days.
This is significant because KraneShares is clearly aiming for a sliver of
the trillions of dollars parked in U.S. money market funds earning little to
no interest at the moment.
Having been a renminbi bull for years myself, I’m excited to see a renminbi
-denominated fixed-income ETF aimed for capital preservation with such an
attractive yield.
A Very Alluring Pitch
According to E Fund Management, KCNY’s sub-advisor, China’s commercial
paper market now tops $270 billion and trades an average $3 billion a day.
Roughly 90 percent of the outstanding paper is issued by local and central
state-owned enterprises, and two-thirds carries an AAA rating by at least
one local rating agency.
By the way, E Fund Management (HK) holds the renminbi qualified foreign
institutional investor license needed by KCNY to directly hold mainland
Chinese securities. It’s a subsidiary of E Fund, one of the largest asset
managers in China.
And to put a finer point on what I said above, KCNY’s index sports an eye-
popping weighted-average portfolio yield of 4.55 percent. Astonished
investors need to understand that China’s yield curve is
very flat, offering plumpy yields at the shorter end of the curve.
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Growing China-Focused Bond-ETF Market
Other issuers are also honing in on mainland China’s higher yields. In just
the past month, there’s been a string of onshore China bond ETF launches.
Van Eck launched its Market Vectors ChinaAMC China Bond ETF (CBON) on Nov.
10. Global X joined the in with its Global X GF China Bond ETF (CHNB) only a
week later. Investor appetite for these funds has been strong, with Global
X’s CHNB and Market Vectors’ CBON pulling in $50 million and $20 million,
respectively, in less than a month.
Yet I think throwing KCNY into the mix with CBON and CHNB is debatable. KCNY
targets such a different sliver of that market that, in my view, it’s
actually the first-to-market fund in its own class.
Here are a few highlights about KCNY worth pointing out.
KCNY Talking Points
KCNY has access to China’s interbank bond market, where more than 90
percent of all onshore bond trading takes place. If fact, commercial paper
in China is only traded on the interbank market, so KCNY has to have access
to it.
The paper held in KCNY is all rated investment grade, by one or more local
credit agencies in China. See my colleague Howard Lee’s blog for his take
on local rating agencies.
Commercial paper in the U.S. is predominantly bought at a discount to par,
but not so in China. According to E Fund, most of the paper held in KCNY
will have a coupon.
The fund launched with an impressive $21 million in seed capital, suggesting
big institutional backing. To put things into perspective, most new ETFs
launch nowadays with only about $2.5 million.
KCNY is fully exposed to the renminbi, a currency that’s appreciated more
than 25 percent against the U.S. dollar since currency restrictions were
relaxed in 2005.
Broad Takeaway
I’ve been talking about innovation in the China ETF space for years now.
KCNY highlights just how innovative issuers can get in bringing alluring,
formerly restricted asset classes to market. | z**y
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