CSOP Asset Management will be listing its onshore Chinese government bond ETF on the Singapore Exchange on Monday, the firm said yesterday in a media briefing jointly held with the local bourse. When launched, it will be the first onshore Chinese fixed income ETF to be listed in the Lion City.
During its initial offering period, the ICBC CSOP FTSE Chinese Government Bond Index ETF gathered $676m in assets, making it the world’s largest pure Chinese government bond ETF, the firm claimed.
“In anticipation of the upcoming announcement from FTSE Russell on the possible inclusion of China onshore bonds, it is deemed a good timing for CSOP to issue the product,” Melody He, managing director at CSOP AM told FSA.
“If the Chinese onshore bonds are included in the three major global indices, it is expected to attract about $320bn of inflows into China onshore bond market in aggregate,” she said.
Global investors remain to be underinvested in the asset class, according to He. As of the end of August, while foreign institutions held around $400bn of Chinese bonds, which was four times the amount held in 2015, this only accounts below 3% of the whole onshore market.
She added that the size of the China bond market has reached $15trn, making it the second largest bond market globally.
CSOP AM’s move follows after it set up a Singapore office as a subsidiary of its Hong Kong business in October. In Singapore, the firm has asset management and family office businesses, according to its website.
Separately, Nikko Asset Management is also expected to launch an onshore China bond ETF. Last week, it filed an application with the Monetary Authority of Singapore and the Singapore Exchange to roll out an ETF that will replicate the returns of the ChinaBond ICBC 1-10 Year Treasury and Policy Bank Bond Index.
The VCC
CSOP’s new offering will make use of the variable capital company (VCC) framework, a new corporate structure that can be used for investment funds that should provide fund managers with greater operational flexibility and cost savings.
It will be the first ETF to utilise the framework, according to He, who believes that there are some advantages in using the structure.
“The VCC structure is an efficient and cost-effective structure for ETFs, which is with more flexibility and transparency. We believe that VCC structure will be quite common going forward given its operational and tax-efficient features.”
