Premia Partners has launched two new China-focused fixed income ETFs on the Stock Exchange of Hong Kong.
Rebecca Chua, Managing Partner of Premia Partners.
The Premia China USD Property Bond ETF (HKD: 3001 HK; USD: 9001 HK; RMB: 83001 HK) provides exposure to short maturity debt securities issued by Chinese real estate companies and traded in offshore markets.
The other, the Premia China Treasury & Policy Bank Bond Long Duration ETF (HKD: 2817 HK; USD: 9817 HK; RMB: 82817 HK), offers access to onshore Chinese Treasury and policy bank bonds situated at the far end of the yield curve.
Each fund gains its exposure by tracking an index from ICE Data Indices using direct physical replication.
Rebecca Chua, Managing Partner of Premia Partners, said: “We are delighted to launch these unique ETFs that offer attractive risk-adjusted returns in this low yield environment.
“Now without opening onshore China bond accounts, investors can conveniently access long-duration Chinese government bonds onshore and high yield USD China bonds offshore without stamp duty, withholding or capital gains tax.”
Property bonds
The Premia China USD Property Bond ETF is linked to the ICE 1-5 Year USD China Senior Real Estate Corporate Constrained Index which consists of US dollar-denominated debt issued by Chinese property developers and traded on the US and eurobond OTC markets.
Secured and senior issues are included while non-rated, subordinated debt, and local government financing vehicles are excluded. Qualifying securities must have a remaining time to maturity between one and five years and an issuer amount outstanding of at least $350 million. Constituents are weighted by market value while capping any issuer at 5%. According to Premia, the index has more than a 75% allocation to bonds rated below investment grade.
The fund’s management fee is 0.58%. Distributions are made on an annual basis.
Long-duration Treasuries
The Premia China Treasury & Policy Bank Bond Long Duration ETF tracks the ICE 10+ Year China Government & Policy Bank Index which covers ultra-long-duration Treasury and policy bank bonds traded in onshore Chinese markets.
Chinese policy banks are responsible for financing economic and trade development as well as state-invested projects. They include China Development Bank, Agricultural Development Bank, and Export-Import Bank of China.
To qualify for the index, a bond must be denominated in renminbi and have a fixed coupon schedule, a remaining maturity above ten years, and a minimum amount outstanding of RMB 10bn for sovereign and RMB 5bn for policy bank issuers. Constituents are weighted by market value.
The fund is advised by BOCHK Asset Management, a member of the Bank of China Group, and comes with a management fee is 0.28%. Distributions are sent to investors semi-annually.
Shen Hua, Chief Executive Officer of BOCHK Asset Management, said: “BOCHKAM is delighted to co-launch with Premia Partners the first long-duration RMB bond ETF. This ETF enjoys low-cost investing, trading flexibility, and high transparency compared to traditional mutual funds, providing an investment alternative for investors to satisfy their needs for asset allocation. We are committed to providing more high-quality products to facilitate RMB internationalization and help Hong Kong to develop as a global asset management centre.”