Deutsche Asset & Wealth Management launch market’s first China sovereign bond ETF

Deutsche Asset & Wealth Management has launched the first exchange-traded fund (ETF) on the European market to provide investors with exposure to China’s domestic sovereign bond market….. 

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The db x-trackers II Harvest CSI China Sovereign Bond UCITS ETF (DR) is a physical replication ETF that tracks the performance of an index of 35 onshore renminbi-denominated bonds issued by the Chinese government. The yield-to-maturity for the underlying index is currently 3.38% with approximately five-year duration (Source: CSI and Deutsche AWM, July 7, 2015). By comparison, the yield on five-year UK government bonds is 1.49% (Source: Bloomberg, July 7, 2015).

The ETF listed this morning on the Deutsche Börse, with a London Stock Exchange listing to follow on July 20, 2015. It has an annual All-in Fee* of 0.55%. The investment manager of the ETF is Harvest Global Investments Limited.

“China’s domestic sovereign bonds provide a high yield relative to equivalent sovereign bonds of countries with similar credit ratings, so we anticipate demand for this ETF should be high. Investors will also be interested in the historically low correlation China’s domestic sovereign debt has to international fixed income and equity markets,” said Marco Montanari, Deutsche AWM’s Head of Passive Investments, Asia-Pacific.

“We are pleased to further our collaboration with Deutsche Asset & Wealth Management. As China’s market develops and opens further to foreign investors, we will continue to be at the forefront of creating new products to provide investors with access to the world’s second-largest economy,” said Peng Wah Choy, Chief Executive Officer of Harvest Global Investments Limited.

China is currently rated AA- by Standard & Poor’s, Aa3 by Moody’s, and A+ by Fitch, the rating agencies. Chinese authorities are implementing a series of economic reforms designed to turn the country into a fully-fledged market economy, including financial liberalisation (Source: China Market Perspectives: Shaping up the new financial market, Deutsche Bank Research, May 16, 2015) – see the notes to editors section below for more details.

The launch of the ETF follows the January 2014 launch of the db x-trackers Harvest CSI300 Index UCITS ETF (DR), which was Europe’s first physical replication ETF tracking China’s domestic CSI300 A-shares equity index.

                   Product Details

                       Name of ETF:               db x-trackers II Harvest CSI China Sovereign Bond UCITS ETF (DR)

                       BBG Code:                   CGB GY/ CGB LN

                       ISIN:                             LU1094612022

                       Fund Currency:             USD

                       Listing Currency:           EUR/USD

                       Annual All-in Fee:         0.55%

                       Physical/synthetic:       Physical

                       Underlying Index:         CSI Gilt-Edged Medium Term Treasury Note Index

                       UCITS compliant:         Yes



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