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TheStreet Open House

3 ETFs for Yuan-Denominated Bonds

Stocks in this article: FXI CYB HAO RMB DSUM

NEW YORK ( TheStreet) -- Analysts, market commentators, and investors continue to debate the possibility that the Chinese economy is in for a hard landing. In the face of these concerns, however, ETF sponsors have continued to churn out products designed to target the nation's marketplace.

In recent years, China's equity market has been a popular destination for up-and-coming fund companies looking to carve out their respective niche in the Darwinian ETF universe. The drive to provide investors with products that offer new and unique exposure to this emerging growth engine led to the creation of these new offerings.

Large cap-focused China funds like iShares FTSE China 25 Index Fund (FXI) are still wildly popular. However, aggressive investors can also take aim at the nation using sector- and style-specific products like the Guggenheim China Small Cap ETF (HAO), Global X China Consumer ETF (CHIQ) and the Guggenheim China Real Estate ETF (TAO).

While many firms have succeeded in targeting China's equity markets, more recently the nation's fixed income market has become all the rage among sponsors. In a matter of weeks, investors have watched three different companies unveil funds aimed at targeting the market for yuan-denominated bonds available to foreign investors.

The newest of the bunch, the Market Vectors Renminbi Bond ETF (CHLC), was launched on Wednesday. The PowerShares Chinese Yuan Dim Sum Bond Portfolio (DSUM) and the Guggenheim Yuan Bond ETF (RMB) were launched during the latter half of September.

Upon initial reaction, these new funds appear to appeal to investors looking to expand the global reach of their fixed income holdings. In addition, however, the products offer a new and potentially more attractive way to gain exposure to China's currency.

The Chinese yuan has been thrust solidly into the spotlight recently as Washington lawmakers have taken steps in an effort to pressure the nation into allowing its currency to appreciate at a more rapid rate.

Given the events taking place in Washington, investors may be eager to gain exposure the Chinese currency. Unfortunately, the yuan has long been a notoriously difficult component of the currency markets for U.S. investors to gain exposure to.

In the past, I have encouraged yuan-hungry investors to turn to the WisdomTree Dreyfus Chinese Yuan Trust (CYB). While it has done an adequate job following the currency's performance, CYB does not track the yuan directly. Rather, it is backed by derivatives including forward contracts which aim to mimic the currency's action. In a previous article I covered CYB's unique investing strategy .

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