D1 banner - Mohammed M'Rabti - Deputy Head of FundsPlace, Euroclear - blog
RMB ETFs open new channel into China’s onshore securities market
I read recently that China has the third largest government bond market in the world. Obviously, this will make it a key focus of attention for international investors searching for yield. In fact, China’s ten-year bonds yield 2.7%, a multiple of the return available in the leading developed markets. They even enjoy a credit rating higher than for most other emergig markets.
The big thing for me is how to access this market. During this year I have had the pleasure of working with a number of China asset managers looking to facilitate access to this market through a new range ETFs which have been launched in Europe. What makes them different? They are all Europe-listed and regulated, but denominated in RMB.
They use the international settlement structure for ETFs, which i worked to establish, as part of Euroclear, in 2013. This makes it possible for issuers to cross-list on multiple exchanges.
The first issue was in March last year when CCBI and Commerzbank teamed up with us to launch the first-ever RMB-denominated Chinese money market ETF in international form. In June this year, Fullgoal Asset Management (HK) launched a range of RMB-denominated ETFs linked to the FTSE China Onshore Bond index and listed them in London and Milan, followed by ICBC Credit Suisse's ICBC CS Wisdom Tree S&P 500 UCITS ETF that went live in July 2017.
These new ETFs give investors a new channel through which to invest in China. It's one that comes with transparency, liquidity and ease of settlement. For me, as an investor, that can only be a good thing.