CBON: First U.S.-listed China Onshore Bond ETF
TOM BUTCHER: Market Vectors ChinaAMC China Bond ETF (CBON) launched on Tuesday, November 11 and began trading on NYSE Arca. Fran, can you tell us about the Fund?
FRAN RODILOSSO: CBON, or "C-bon," seeks to track, before fees and expenses, the price and yield performance of the ChinaBond China High Quality Bond Index. That Index seeks to track the performance of the onshore Chinese bond market, which is the largest bond market within the emerging markets world and one of the largest markets in the world period. It's an over five trillion U.S. dollar equivalent market. However, access to that market is very limited for foreign investors. CBON is the first ETF designed to provide access to that market. What the Index contains are bonds issued by the Chinese government, by quasi-government institutions, such as policy banks, and by credit issuers, such as corporate issuers in China. The weightings in that Index are generally 20% government, 30% policy banks, and 50% corporate issuers.
BUTCHER: Why should investors consider investing via CBON in mainland China?
RODILOSSO: The onshore Chinese bond market has in recent years displayed fairly low correlation with other fixed income asset classes, including other emerging markets asset classes. Therefore the diversification play here actually seems somewhat attractive, at least from an historic perspective. Also, China's overall credit standing and the fact that it has very low inflation at the moment make real yields in China attractive on a comparative basis.
BUTCHER: Fran, can you tell me who sub-advises the Fund?
RODILOSSO: We use a local partner to gain access to the Chinese onshore bond market and we have a sub-adviser in that partner, China AMC, one of the largest asset managers on mainland China.
BUTCHER: Thank you very much. For further information on the Fund, please go to www.vaneck.com/CBON. That's "C-B-O-N."
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An investment in the Fund may be subject to risk which include, among others, credit risk, interest rate risk, sovereign and quasi-sovereign defaults, adviser and sub-adviser risk, and risk of the RQFII regime, all of which may adversely affect the Fund. Investments in mainland China may be subject to local customs, duties and rights of ownership, which might change at any time should policy makers deem them in China's best interest. As the Fund invests in securities denominated in Chinese Renminbi, changes in currency exchange rates may negatively impact the Fund's return. Foreign and emerging markets investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, changes in currency exchange rates, unstable governments, and limited trading capacity which may make these investments volatile in price or difficult to trade. The Fund's assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors.
Through the Renminbi Qualified Foreign Institutional Investor (RQFII) program or Qualified Foreign Institutional Investor (QFII) licenses, RMB Bonds are made available to certain foreign investors. The RQFII approves a specific aggregate dollar amount in which the RQFII or QFII can invest in RMB Bonds. The size of the Fund’s direct investment in RMB Bonds will be limited by the size of the RQFII quota, and should this quota be depleted, there is no guarantee more will be granted.
China Bond China High Quality Bond Index is compiled and calculated by China Central Depository & Clearing Co., Ltd. All copyright in the China Bond China High Quality Bond Index values and constituent list vests in China Central Depository & Clearing Co., Ltd.
Diversification does not assure a profit nor protect again a loss. Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market. You will incur brokerage expenses when trading Fund shares in the secondary market. Past performance is no guarantee of future results. Returns for actual Fund investments may differ from what is shown because of differences in timing, the amount invested, and fees and expenses.
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