E Fund RQFII sovereign bond ETF goes public

17 March 2014   Category: News, Asia, China, Global, Hong Kong   By Hui Ching-hoo

E Fund Management (Hong Kong) listed its first RQFII onshore sovereign bond ETF – the E Fund Citi Chinese Government Bond 5-10 Year Index ETF – on the Hong Kong Stock Exchange on March 14.

The fund raised more than 500 million RMB (US$81.3 million) from the institutional side through the primary market.

The underlying Citi Chinese Government Bond 5-10 Year Index of the fund has been designed to track the performance of RMB-denominated domestic sovereign debt with a tenor between five to ten years. It also comprises fixed-rate government bonds issued by the Chinese government.

Ma Jun, deputy chief executive officer of E Fund Management, played down the negative impact RMB depreciation and default risk has had on investor appetite towards Mainland onshore bonds, saying the RMB is expected to appreciate against major currencies with a slower tempo going forward in view of the country’s sound economic fundamentals.   

Faye Zhang, a fund manager for the E Fund Citi Chinese Government Bond 5-10 Year Index ETF, explained that the company’s decision to launch the fund was partly due to the availability of Chinese government bond futures last year. The futures provide comprehensive protection to hedge against the bonds’ risk exposure.  

Up to the end of February this year, E Fund Management had been awarded a total of 24.7 billion RMB worth of RQFII quotas. The company is considering drawing down on part of the quotas to launch a UCITS fund in London – this fund would be structured to link with the MSCI index.