New China Onshore, Offshore, Subordinated Debt ETFs


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Investors big on debt and China have even more ETFs to choose from with Deutsche Asset & Wealth Management's new launches: dbX-trackers Solactive Investment Grade Subordinated Debt Fund ( SUBD ) and db X-trackers Harvest MSCI All China Equity Fund ( CN ).

SUBD tracks the Solactive Subordinated Bond Index, comprised of investment-grade, subordinated, U.S. dollar-denominated, corporate bonds. Subordinated bonds are loans that are paid only after senior debt holders are paid in full should a company default, making them slightly more risky than unsubordinated debt.

The average coupon in the underlying index is 5.95%. The yield to worst, or the lowest possible yield that investors can get without the issuer defaulting, is 4.1%.

CN tracks the MSCI All China Index with 612 names, which includes large- and midcap Chinese companies listed on stock markets. It's lost an average annual 5.5% the past three years while gaining an average annual 4.9% and 10.7% the past five and 10 years.

"China growth continues to be a concern with the weak numbers coming out of the nation," Chris Brown, chief investment strategist at Pax World Management in Portsmouth, N.H., with $3.31 billion in assets under management, said in an email.

China's April Purchasing Managers Index, a gauge of manufacturing, came in at 48.1, below the initial reading of 48.3, HSBC announced Monday. That's a worrying sign as readings below 50 signal contraction, while readings above it mean expansion.

The world's second-largest economy after the U.S. is expected to grow 7.3% in 2014 -- the slowest in 24 years and down from 7.7% last year. Some economists believe that China's leaders are pressured to inflate the economic data to protect their image.

"A combination of relatively steady, projected real Chinese growth of more than 7% and a single-digit 2014 forward price-earnings multiple (of 8.6) would ordinarily be the envy of nearly every other economy on the planet and almost certainly signal a favorable stance were it not for the Communist government's uncompromising refusal to reinvigorate the national economy via fiscal and monetary stimulative measures any time soon," John Krey, international investment analyst of the newsletter Global Markets Intelligence, and Todd Rosenbluth, director of ETF research for Standard & Poor's, wrote in an S&P Capital IQ report Monday.

They recommend overweighting iShares MSCI Indonesia (INDO) and iShares MSCI Taiwan ( EWT ), which they believe are undervalued.

"Until Chinese real GDP regains its past vibrancy from either external sources or some form of official stimulus, comparatively more appealing stock markets in the Asian region offer investors more enticing alternatives than China," Krey and Rosenbluth wrote.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , ETFs
More Headlines for: SUBD , CN , EWT

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