French asset management firm Lyxor, is planning to launch a China government bond exchange-traded fund (ETF) in Europe.
The firm has been awarded a licence on the S&P China Sovereign Bond 1-10 Year Spread Adjusted Index by S&P Dow Jones Indices (SPDJI).
The index is made up of government bonds issued by the People’s Republic of China, with maturities ranging between one and ten years. The bonds are traded on the Shanghai or Shenzen stock exchanges as well as the China Interbank market. The index represents a yield to maturity of 3.2% in renminbi for an average duration of 4.2 years.
Despite the size of both China’s economy and bond market, the second and third largest in the world respectively, access to its bond market is still highly restricted for foreign investors. Heather McArdle, director of fixed income indices at SPDJI says that there has been progressive liberalisation of China’s financial market, offering greater accessibility to international investors.
The ETF will be sub-managed by the Hong-Kong subsidiary of Lyxor’s Chinese joint-venture Fortune SG.
Lyxor had €113.7 billion in assets under management as of April 30, 2015.
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