Improving Conditions in EM Bonds Spell Opportunity for China ETF

Janus Henderson, a globally recognized company specializing in managing assets, has recently drawn attention to bonds in emerging markets (EM) through a written analysis. They have pointed out that the present market conditions exhibit a favorable atmosphere for potential investments in EM debt.

Naturally, emerging market bonds have been experiencing the negative effects of increasing interest rates and a stronger American currency in recent years. Nevertheless, there is a possibility that the situation may start to change in favor of emerging market debt. The overall global economic conditions are evolving as central banks gradually loosen their monetary policies.

According to the report, the main driver of the asset class's outlook and path for the rest of 2023 is the uncertain global macro environment. However, we anticipate a more favorable flow of dynamics in the long run due to a growing difference in economic growth between emerging markets (EM) and developed markets (DM).

When talking about EM assets, China is the typical force that benefits everyone. The economy, which ranks second globally, is currently facing a downturn due to the pandemic. However, recent actions taken by the government to provide economic stimulus could assist in boosting its recovery.

The report also stated that in the EM area, Asia that is currently progressing appears to have a promising future. The International Monetary Fund predicts that Asia will experience growth rates of 5.3% in 2023 and 5% in 2024. However, this projection is contingent on how quickly China is able to recover.

Investors who specialize in stable returns and are currently considering investments in China might find promising prospects as the country aims to reignite its economic growth. At the same time, the government might have to release bonds to generate funds for their stimulus plans, potentially impacting the performance of the KraneShares Bloomberg China Bond Inclusion Index ETF (KBND).

KBND provides a great opportunity for investors to broaden the range of bonds in their portfolios. The fund follows the Bloomberg China Inclusion Focused Bond Index as a reference, aiming to mirror the performance of China's domestic bond market denominated in renminbi.

The general characteristics of KBND consist of:

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