SINGAPORE -- The Singapore Exchange debuted the world's largest exchange traded fund to invest purely in Chinese government bonds on Monday. The move is part of SGX's efforts to step up access to China for investors in the city-state.
Announced by the bourse last week, the move is the latest initiative by the SGX to build a portfolio of multi-asset offerings, trying to chip away at rival Stock Exchange of Hong Kong's prominence as a gateway for traders to mainland China.
The SGX in August announced a deal with U.K.-based index provider FTSE Russell to jointly develop and market an Asian and emerging markets-focused, multi-asset index derivatives offering.
"Global fixed income investors have been turning to Chinese sovereign bonds for added diversification and yields, and this product is a strong addition to our platform," said Loh Boon Chye, chief executive officer of SGX.
Managed by Hong Kong-based CSOP Asset Management Limited, the institutional-grade ETF replicates the performance of fixed-rate Chinese government bonds as measured by the FTSE Chinese Government Bond Index.
SGX said the fund has garnered "resounding investor interest" with an initial assets under management of $676 million, which it said demonstrated "robust demand" for efficient access to China's bond markets.
The product is also the first ETF to list under the new Variable Capital Companies framework launched by the Monetary Authority of Singapore this year -- a new corporate structure that adds to the stack of fund structures available in Singapore, including limited partnerships, companies and unit trusts.
"The new VCC framework will encourage the consolidation of fund domiciliation and fund management activities locally, creating a full-service fund ecosystem in Singapore and maximising value from the full fund management value chain. It will also strengthen Singapore's role as a key hub for fund managers to invest into the Asia-Pacific region," according to professional services firm Crowe Singapore.
More than 100 VCC funds have been set up in the city-state since the framework was introduced.
Jacqueline Loh, deputy managing director for Markets and Development at the Monetary Authority of Singapore, said, "The debut of this product class marks a new milestone for Singapore's financial sector, as we continue to connect global investors to Asia's promising market opportunities."
CSOP Asset Management noted that the China bond market has already reached $15 trillion -- the second largest in the world after the U.S..
"The Chinese Government Bond Index ETF is designed to help capture the investment opportunities brought by the booming China onshore bond market and its continuous inclusion into the world's major global indices," said Ding Chen, chief executive of CSOP.