Bond ETF Total Surpasses 200 Billion Yuan
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Since the establishment of China’s first bond exchange-traded fund (ETF) in 2013, the concept of investing in bond index funds has gradually gained traction among investors. Over recent years, driven by favorable market conditions and supportive policies, bond ETFs have emerged as attractive investment vehicles, characterized by their ability to provide diversification, low fees, and a comprehensive selection of options. Data from Wind indicates that after surpassing 100 billion yuan last May, the total value of bond ETFs exploded to more than 200 billion yuan in just nine months. As of February 7, 2025, the total number of bond ETFs in the market has reached 29, with a combined value exceeding 200 billion yuan—a clear indication that China’s bond ETF market is entering a new phase of development.
The bullish momentum in the bond market in 2024 has significantly driven the expansion of both the market share and size of bond ETFs. Notably, the government bond ETF managed by Fuguo Fund (511520) stands out with remarkable performance. According to data from the Shanghai Stock Exchange and Fuguo Fund, as of February 11, 2025, the fund has amassed a scale of approximately 41.853 billion yuan, positioning it at the top of the market among bond ETFs. This feat illustrates the strong appeal and market acceptance of the government bond ETF. In terms of performance, the fund has also drawn attention; according to the quarterly report, as of December 31, 2024, the net asset value growth rate of the fund for the past year was 9.79%, outperforming the benchmark yield rate of the same period, which was 7.26%, and the overall increase of 4.47% in the Wind Bond Fund Index. Furthermore, the net asset value growth rate for the A class shares of its linked fund reached 11.47%, compared to a benchmark of just 6.9%. Such outstanding performance has been crucial in attracting continuous inflows of capital into the government bond ETF.
The fund manager of the government bond ETF, Zhu Zhengxing, attributes the rapid growth to two primary factors. On one hand, the product design of the ETF itself possesses several highlights that make it appealing to investors. It boasts good liquidity, low fees, and relatively controllable volatility. Public data indicate that the average daily trading volume of the government bond ETF in 2024 exceeded 6.7 billion yuan, reflecting its active trading status. Moreover, the total management and custody fees amount to merely 0.2% per year, representing a low investment cost. The fund tracks an index with a duration of approximately 7.5 years, making it the only ETF in the market focused on long-duration government bonds. Given that government bonds provide stronger coupon protection compared to treasury bonds, the holding experience is favorable, offering clients a convenient trading tool. Additionally, the government bond ETF is eligible for pledge-style repurchase operations on the Shanghai Stock Exchange, which can further enhance returns.
On the other hand, the bullish trends in the bond market in recent years have provided substantial market support for the impressive performance of the government bond ETF (511520). Zhu Zhengxing pointed out that 2024 marks the seventh year in a bond bull market, and it has been one of the strongest years for interest rate bonds. Furthermore, the relative liquidity has been quite lax, and most of the time the bond market finds itself in an "asset shortage" environment. In such a context, many investors have opted to leverage the government bond ETF as a simple avenue to extend duration within the market, thus positioning themselves to better capture the bond bull market.
Looking ahead to 2025, Zhu Zhengxing believes that the bond market is likely to remain in a bullish environment. In the face of complex global changes, China’s economy is grappling with multiple challenges. Factors such as net exports and currency rates may face pressure due to shifts in the international economic situation. The fundamental economic landscape in China is at a crucial transitional phase, marked by debt management and a shift from old to new momentum. Under these conditions, the central bank will likely maintain a loose monetary policy to ensure adequate market liquidity and to reduce financing costs for the real economy. Fiscal policy is expected to focus on "risk prevention," aiming to mitigate systemic financial risks through reasonable fiscal spending arrangements. Achieving "steady growth" will play a crucial role in accomplishing this risk prevention goal; only by maintaining stable economic growth can debt risks be effectively alleviated and facilitate the transformation and upgrading of the economic structure. This macroeconomic policy environment will continue to provide robust support for the bullish trend in the government bond market, creating favorable conditions for the growth of government bond ETFs.
As the bond market continues to evolve and improve, along with an increasing awareness among investors regarding bond ETFs, the market is poised for sustainable growth. The government bond ETF, as a market leader, is expected to leverage its unique product advantages and strong performance to stand out in the competitive landscape, offering more investment opportunities and substantial returns for investors. Furthermore, the successful experiences of the government bond ETF will serve as a beneficial reference for the development of other bond ETFs, thereby driving innovation and growth across the entire bond ETF market.
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