Other long-only ETFs will follow in the second half of the year and the company is also looking at the more exotic end of the market.
Both of the bond products include a mix of government and corporates across all the major Asian markets. However, one – the JP Morgan USD Asia Credit Bond Index ETF – gives exposure to USD-denominated debt and includes 50% corporates, 50% sovereign and quasi-sovereign.
The second – the iShares Barclays Capital Asia Local Currency Bond Index ETF – follows a bespoke index which will start comprising 98% government and government-related local currency bonds. The very low exposure to corporates will increase as the local currency credit markets mature and gain liquidity.
The two new ETFs are traded in USD and listed on the Singapore Stock Exchange (SGX). The JP Morgan Asia Credit Bond Index ETF has a total expense ratio (TER) of 0.3% while the Barclays Capital Asia Local Currency Bond Index ETF’s TER is 0.35%. There is no plan to list them on SGX’s arch-rival, the Hong Kong stock exchange. They are cash-based ETFs that invest directly in the underlying bonds.
Plans are afoot for several more launches. They are not officially finalised but are likely to include South-East Asian equity and commodities index products.
iShares is also aware of an increasing demand in Asia for the more esoteric flavours of tracker – such as those with leverage and those that short, for instance.
"Clearly there is a demand for exotic products," says managing director of the Asia Pacific business Nick Good. "But it’s important that investors should understand how they operate. In many instances, they might return what you expect over a short period but in the long-term they can diverge."
