SGX ushers in the first China bond ETF in Singapore, created by CSOP, ICBC

September 17, 2020.

The on Thursday unveiled the listing of the world’s biggest exchange-traded fund to invest solely in Chinese government bonds, aiming to capitalize on investors’ accelerating demand to access opportunities in the second-largest bond market on the globe.

The CSOP FTSE Chinese Government Bond Index ETF, which is managed by CSOP Asset Management, is not only the Hong Kong-based company’s first ETF in Singapore but also the first China bond ETF in the city-state.

The ETF was developed in partnership with ICBC Wealth Management and ICBC Asset Management as the investment advisors, CSOP said Thursday, adding that the product had initial assets under management from investors that reached CNY 4.6 billion ($680 million) at the end of its subscription period. 

It will start trading on Sept. 21, SGX said. 

Ding Chen, CEO of CSOP Asset Management, said that the new product is meant to “capture the investment opportunities brought by the booming China onshore bond market and its continuous inclusion into the world’s major global indices.” 

“We believe this China-themed fixed income ETF with relatively low cost, easy access and diversified bond holdings will suit the local investors’ demand of seeking for a relatively stable yield,” Chen said. 

The fund will “adopt a representative sampling strategy” to replicate the performance of fixed-rate government bonds as measured by the FTSE Chinese Government Bond Index, CSOP said, adding that the fund is denominated in renminbi but can be created and redeemed in both the U.S. dollar and renminbi in the primary market.

The new ETF is not only CSOP’s first listing on the SGX but is also the first ETF to use the new Variable Capital Companies framework launched by the and the Accounting and Corporate Regulatory Authority this year, SGX said. The framework, unveiled in January, is a corporate structure for investment funds that offers flexibility and cost savings to global asset managers trying to establish new funds in Singapore.

“The listing of the first China bond ETF in Singapore is most timely,” Jacqueline Loh, deputy managing director for markets and development at the MAS, said. “It offers a low-cost and liquid avenue for global investors to gain access to Chinese assets through Singapore, at a time when China’s bond market is increasingly opening up to greater foreign investor participation.”

The China onshore bond market, which is the second-largest behind that of U.S., at $15 trillion, has been growing rapidly as it further opens up to global investors. 

Foreign players held more than CNY 2.8 trillion ($413.9 billion) of onshore Chinese bonds as of August this year, CSOP said, adding that this is four times greater than the amount held five years ago.