Flagship ATF index undergoes quarterly rebalancing

Index offers retail and institutional investor transparent access to onshore Chinese bond market

Flagship ATF index undergoes quarterly rebalancing

(ATF) The Asia Times Financial (ATF) flagship China Bond 50 index has undergone its quarterly rebalancing, with 31 of its 50 onshore renminbi-denominated bonds changing over. The rebalancing, which takes place every three months instead of the more standard monthly change, reduces the yearly transaction costs of replicating the index.

“The China Bond 50 index is an excellent tool for retail and institutional investors looking for an easy way to access China’s often complex domestic corporate bond market,” said Christian Kronseder, CEO of Swiss-based ALLINDEX, co-creator of the index, along with Capital Link International and Asia Times Financial.

“It has a small number of constituents (50) which makes it very easy to replicate. Moreover, it has a low tracking error given that replication occurs on a quarterly basis.”

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Kronseder added that all the index constituents are straight bonds, with a yearly coupon payment and principal repayment at maturity.  

The constituent bonds were chosen from the ATF ALLINDEX Enterprise, Corporate, Financial, and Local Government sub-indexes, which themselves are selected from across the entire onshore Chinese bond market. 

Constituents of the China Bond 50 index are picked based on the average measure of their trading volume in the last 12 months, are of a minimum issue size of $100 million, and rated AAA by Chinese credit rating agencies. (Onshore renminbi-denominated Chinese bond ratings are considered higher than those that would be assigned by global rating agencies).

Foreign inflows into China’s bond market reached a record high in the second quarter, at $33.5bn, hitting $20bn in the month of August alone, according to Exante Data. A further acceleration of foreign inflows is expected given a strong yuan outlook, high interest rate premiums, ongoing global reserve diversification and the inclusion of Chinese government bonds into the World Government Bond Index FTSE Russell.

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