TalkingPoints
The iBoxx ChinaBond Asian High Yield Index

Kangwei Yang
Director, Fixed Income Indices
S&P Dow Jones Indices

The iBoxx ChinaBond Asian High Yield is designed to reflect
the performance of high yield bonds from Asian issuers,
denominated in USD, CNY, and SGD. This index is a joint
initiative between S&P Dow Jones Indices (S&P DJI) andChinaBond Pricing Center Co., Ltd. (CBPC). The index seeks
to combine the bond valuation data and domestic market
expertise of CBPC with S&P DJI’s award-winning global fixedincome index expertise that provides investors with accurate
and objective indices to assess the performance of therespective underlying markets and investments.
1. Why was the iBoxx ChinaBond Asian High Yield launched?
S&P DJI: Historically, the Asian high yield market has been mostly dedicated to the U.S.
dollar (USD) space, where Real Estate bonds from Chinese issuers made up close to halfof the market prior to the beginning of China’s Real Estate shift in 2021. Since then,the aggregate market size of Asian USD high yield bonds has declined significantly,
as represented by iBoxx USD Asia ex-Japan High Yield 1+ (see Exhibit 1).1 The declining
market size presents challenges for Asian high yield fund managers, including theability to continue to allocate and find liquidity in the remaining Asian high yieldbonds in the index.
At the same time, Asian local currencies have continued to gather interest frominvestors as a diversifier from traditional hard currency exposures. Asian local currency
bond markets, as a whole, have also grown in size and depth over the past few years.
These factors drove us to evaluate the accessible local currency bond markets withsignificant high yield exposure, and as a result, we partnered with CBPC to develop
the iBoxx ChinaBond Asian High Yield, which tracks Asian-issued USD, CNY, and SGD
bonds. As seen in Exhibit 1, with the inclusion of Asian local currency bonds, the iBoxx
ChinaBond Asian High Yield consistently provided a larger market size (capacity)
compared to the iBoxx USD Asia ex-Japan 1+ from Dec. 31, 2020 to Sept. 30, 2023.
The goal of this index is to provide a measure for investable high yield bonds in the Asianmarket beyond USD-denominated bonds, as well as to give a broader perspective of the
Asian high yield space as local bond markets continue to develop in the years to come.
Exhibit 2 shows the breakdown of bonds in the index by currency, as of Sept. 30, 2023.

S&P DJI would like to thank ChinaBond Pricing Center Co., Ltd. (CBPC) for their contribution to this report.
The iBoxx USD Asia ex-Japan High Yield 1+ was chosen as a comparator in this study because the index’s minimum remaining time to maturity of one year
for bond eligibility is similar to that of the iBoxx ChinaBond Asian High Yield.

1

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The iBoxx ChinaBond Asian High Yield Index

Exhibit 1: Market Size of the iBoxx ChinaBond Asian High Yield versus
the iBoxx USD Asia ex-Japan High Yield 1+
400
350

USD Billions

300
250
200
150
100
50

iBoxx USD Asia ex-Japan High Yield 1+

iBoxx ChinaBond Asian High Yield

Source: IHS Markit, part of S&P Global. Data as of Sept. 30, 2023. Past performance is no guarantee of future results.
Chart is provided for illustrative purposes.

Exhibit 2: Currency Breakdown of the iBoxx ChinaBond Asian High Yield

6%
9%

85%

Source: IHS Markit, part of S&P Global. Data as of Sept. 30, 2023. Chart is provided for illustrative purposes.

Sep. 2023

Jun. 2023

Mar. 2023

Dec. 2022

Sep. 2022

Jun. 2022

Mar. 2022

Dec. 2021

Sep. 2021

Jun. 2021

Mar. 2021

Dec. 20200TalkingPoints

The iBoxx ChinaBond Asian High Yield Index

2. What are some of the considerations in the methodologyof the iBoxx ChinaBond Asian High Yield?
S&P DJI: When we designed the index, the intention was to produce a view of the Asian high yield market
that investors were familiar with (i.e., USD bonds), yet, at the same time, expand that view to introduce
elements of local currency exposure to broaden the index universe.
As a result, from an index methodology perspective, we have implemented an overall issuer cap of 2%.
Additionally, non-USD issuers are subject to a cap of 0.5% of the overall index. This approach seeks to address
three concerns. First, it aims to minimize accessibility issues to local currency bonds for investors who might beconcerned about liquidity. Second, for index funds, this rule allows investors to gradually become accustomed
to local currency bond markets without a need to purchase large amounts of local currency bond exposure
instantaneously. Third, this serves to provide greater diversification across issuers in the index.
Determining which local markets would be eligible for inclusion into the index was another consideration.
From that perspective, we looked at the general liquidity, accessibility, and size of the local markets,
especially those with larger high yield issuances. As a result, we have had CNY and SGD local markets
represented in the index from the onset. In the long term, the aim is to periodically review the eligibilityof other Asian local currency markets as regional bond markets continue to grow.

Exhibit 3: Top 10 Issuers by Market Size in the Index
Ticker

Weight (%)

ICBCAS

2.0

NWDEVL

2.0

PKSTAN

2.0

GRNKEN

2.0

WYNMAC

2.0

SANLTD

2.0

NSANY

2.0

SOFTBK

2.0

HRINTH

2.0

MPEL

2.0

Source: IHS Markit, part of S&P Global. Data as of Sept. 30, 2023. Table is provided for illustrative purposes.

3. What are the key characteristics of this index?
S&P DJI: To showcase the characteristics of this index, we can compare the iBoxx ChinaBond Asian High Yield
with the iBoxx USD Asia ex-Japan Asian High Yield 1+.
The top five sectors of the iBoxx ChinaBond Asian High Yield and iBoxx USD Asia ex-Japan High Yield 1+
made up the majority of the underlying market weights of these indices, at 68.3% and 71.6%, respectively,
as of Sept. 30, 2023. However, sectors were more equally distributed across the iBoxx ChinaBond AsianHigh Yield compared to the iBoxx USD Asia ex-Japan High Yield 1+.

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The iBoxx ChinaBond Asian High Yield Index

Exhibit 4: Sector Breakdown of the iBoxx ChinaBond Asian High
Yield and iBoxx USD Asia ex-Japan High Yield 1+
SectoriBoxx ChinaBond AsianHigh Yield (%)

iBoxx USD Asia ex-Japan
High Yield 1+ (%)

Difference (%)

Core Financials

17.17

25.07

-7.90

Financial Services

15.45

9.35

6.10

Real Estate

13.49

10.60

2.89

Consumer Services

12.07

13.59

-1.52

Utilities

10.10

12.97

-2.87

Basic Materials

7.49

7.28

0.20

Industrials

4.88

4.47

0.41

Sovereigns

4.84

7.54

-2.70

Telecommunications

4.55

2.04

2.51

Consumer Goods

3.98

1.43

2.55

Energy

3.05

4.19

-1.14

Technology

2.03

0.90

1.13

Public Utilities

0.50

0.00

0.50

Agencies

0.41

0.56

-0.15

Source: IHS Markit, part of S&P Global. Data as of Sept. 30, 2023. Table is provided for illustrative purposes.

As of Sept. 30, 2023, the iBoxx USD Asia ex-Japan High Yield 1+ offered a slightly higher yield and lower annual
modified duration as compared to the iBoxx ChinaBond Asian High Yield. However, the accessible bond universe
was substantially larger in the iBoxx ChinaBond Asian High Yield, with 65 additional issuers and 214 more bonds.
The capped market size (due to the issuer caps) of the iBoxx ChinaBond Asian High Yield was also larger thanthe uncapped market size of the iBoxx USD Asia ex-Japan High Yield 1+.

Exhibit 5: Index Profile of the iBoxx ChinaBond Asian High Yield
and iBoxx USD Asia ex-Japan High Yield 1+
SectorNumber ofIssuers

Numberof Bonds

Market Value(USD Billion)

AnnualYield (%)

Annual ModifiedDuration (Years)

iBoxx ChinaBond AsianHigh Yield

193

445

144.11

11.82

2.53

iBoxx USD Asia ex-Japan
High Yield 1+

128

231

103.80

14.38

2.29

Source: IHS Markit, part of S&P Global. Data as of Sept. 30, 2023. Past performance is no guarantee of future results.
Table is provided for illustrative purposes.

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The iBoxx ChinaBond Asian High Yield Index

4. How has the performance of the iBoxx ChinaBond Asian High Yield
compared with traditional Asian USD high yield bond indices overrecent years?
S&P DJI: From Dec. 31, 2012, to Sept. 30, 2023, the iBoxx ChinaBond Asian High Yield returned 1.73% on anannualized basis, compared to 0.77% for the iBoxx USD Asia ex-Japan High Yield 1+. From Sept. 30, 2021,
at the start of China’s Real Estate shift, to Sept. 30, 2023, the iBoxx ChinaBond Asian High Yield lost
10.47% (annualized), outperforming the iBoxx USD Asia ex-Japan High Yield 1+ (-13.99% annualized).
The relative outperformance since late 2021 was largely attributed to the issuer capping applied in the iBoxx
ChinaBond Asian High Yield, which provided insulation on losses incurred by large issuers, as well as higher
local currency returns (in USD unhedged terms) compared to the USD component of the index.

Exhibit 6: Performance of the iBoxx ChinaBond Asian High Yield versus
the iBoxx USD Asia ex-Japan High Yield 1+
170
160

Index Level

150
140
130
120
110
100
90
80
2012

2013

2014

2015

2016

iBoxx ChinaBond Asian High Yield

2017

2018

2019

2020

2021

2022

iBoxx USD Asia ex-Japan High Yield 1+

Source: IHS Markit, part of S&P Global. Data as of Sept. 30, 2023. Past performance is no guarantee of future results.
Chart is provided for illustrative purposes.

5. How are the bond valuations from the CBPC used in this index?
CBPC: CBPC is a wholly owned subsidiary of the China Central Depository & Clearing Co. (CCDC). It is a platform
built by the CCDC to provide a reliable set of pricing benchmarks for financial markets based on its uniqueexpertise and neutrality as a central security depository. CBPC offers the most comprehensive RMB bondvaluations and risk analytics available in the Chinese fixed income markets. These metrics have become
key references for the implementation of fiscal and monetary policies, and they can have wide applications
for market institutions. The CBPC provides ChinaBond Valuations for all RMB bonds in the markets, totaling
approximately RMB 146 trillion. At the end of 2022, ChinaBond Yield Curves were used as reference rates
for bonds of more than RMB 4.67 trillion, accounting for 95.85% of bonds that used market-based rates
as reference rates and 100% of commercial bank perpetual bonds.
ChinaBond Pricing Products maintain rigorous quality control. Since 2019, the CBPC has continuously
published reports on the Pricing Products’ compliance with IOSCO Principles for Financial Benchmarks.
The Next-Generation System Construction Project of ChinaBond Pricing Products were recognizedat the 2021 Financial Technology Development Awards from the People’s Bank of China.

The iBoxx ChinaBond Asian High Yield Index

6. Why is China’s bond market relevant to international investors?
CBPC: China’s bond market is the second-largest bond market in the world, at around USD 17 trillion,
and it is also one of the fastest-growing bond markets globally. Moreover, China’s bond market still
has substantial potential to grow given the size of the Chinese economy relative to that of Japan,
the U.S., Hong Kong, and Singapore.
China’s bond market has attracted increasing interest from global investors, largely for the following reasons:Overseas investors have growing confidence and expectations of continuous, long-term growth in the Chinese
economy and, therefore, RMB-denominated assets. Moreover, from a near-term perspective, given the country’s
monetary policy cycle and interest rate adjustments differ from those of other developed and emerging
economies, the distinct performance of China’s bond market make the segment a potential sourceof diversification. When contrasted with the U.S. Federal Reserve’s sharp pace of raising interest
rates since 2022, the moderate monetary conditions of RMB-denominated assets could offer global
investors with steadier and more predictable returns.

7. How have the regulations and accessibility to China’s onshore bonds
changed over the years for international investors?
CBPC: Since the formation of the Qualified Foreign Institutional Investor program in 2002, China's financial
markets have continued to open up and more schemes have been developed to facilitate the participationfrom international investors. The China Inter-Bank Market’s Direct and Bond Connect programs were launchedin 2016 and 2017, respectively, to enable international investors to trade Chinese onshore bonds directly
through the Bond Settlement Agent and the Hong Kong Central Moneymarkets Unit. Since their creation,
more markets and product varieties have been made accessible to overseas investors.
Chinese onshore bonds have also become more liquid and more recognized assets since China’s government
bonds started to be included in major bond indices in 2019. As of June 2023, over 1,100 global institutions from
more than 60 countries, including various central banks, have entered China’s onshore interbank bond market
and purchased Chinese onshore bonds worth nearly a net total of USD 79 billion in the first half of the year.
Going forward, we expect China’s bond market will continue to provide a more friendly and convenientinvestment environment for domestic and international investors, supporting the constructionof a high-level opening-up pattern adapted to the requirements of high-quality development,
and improving the international competitiveness of China’s financial market.

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The iBoxx ChinaBond Asian High Yield Index

TalkingPoints

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