Van Eck announces launch of Market Vectors ChinaAMC China Bond ETF

By Toni Weeks

San Luis Obispo, Calif., Nov. 11 – Van Eck Global said it has launched a new exchange-traded fund that will provide investors with direct access to China’s onshore bond market.

The Market Vectors ChinaAMC China Bond ETF seeks to invest in all major segments of the Chinese fixed-income markets, including sovereigns, policy banks and high-rated corporate bonds.

“China’s domestic bond market is expanding and evolving at the same time,” Francis G. Rodilosso, senior investment officer for Market Vectors ETFs and a portfolio manager of the new ETF, said in a press release. “While the full liberalization of the markets is likely to take a long time, movement towards greater access for borrowers and lenders and a higher degree of market-oriented financings such as bond issuance have already greatly broadened the opportunity set for local investors.”

The new ETF (NYSE Arca: CBON) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the ChinaBond China High Quality Bond index, which is comprised of fixed-rate, renminbi-denominated bonds issued in the People’s Republic of China by Chinese credit, governmental and quasi-governmental issuers. As of Nov. 10, the yield to maturity for the index (Symbol: CDHATRID) was 4.1%.

“China is currently the largest emerging markets bond market, yet to this point, investors outside of mainland China have been mostly excluded from direct ownership of locally issued bonds,” Rodilosso said. “China’s onshore bond market has had historically low correlation to core asset classes and has delivered attractive yields in comparison to developed bond markets in recent years.”

The fund has a gross expense ratio of 0.57% and a net expense ratio of 0.5%, which is contractually capped until Sept. 1, 2016.

“China continues to be a focus for Van Eck Global, particularly through our Market Vectors ETF family,” Market Vectors marketing director Ed Lopez said in the release. “Its economy has had significant impact on global markets in recent years and continues to evolve, yet may be under-allocated in investors’ portfolios.”

Van Eck’s focus on China and emerging markets funds is illustrated by the company’s launch of the first ETF providing exposure to A-shares in the United States, the Market Vectors ChinaAMC A-Share ETF (NYSE Arca: PEK), on Oct. 13, 2010 and the Market Vectors ChinaAMC SME-ChiNext ETF (NYSE: CNXT), an equity ETF focused on non-government-owned companies, this past summer.

As previously reported, David Lai and Jeffrey Wu of China Asset Management (Hong Kong) Ltd., the fund’s subadviser, and Michael F. Mazier and Rodilosso of New York-based Van Eck Associates Corp., the fund’s investment adviser, comprise the portfolio management team.

There are no shareholder fees. Including a management fee of 0.4% and taking into account a fee waiver and expense reimbursement with the investment adviser, total annual fund operating expenses are expected to be 0.5%.

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