Ice Bofa Asia Dollar High Yield Corporate China Issuers Index
Introduction
Ice Bofa Asia Dollar High Yield Corporate China Issuers Index is a bond index that measures the performance of high-yield corporate bonds issued by Chinese companies. The index was launched in 2011 by Bank of America Merrill Lynch and ICE Data Indices. It is one of the most widely used benchmarks for investors who want to invest in Chinese high-yield corporate bonds.
How the Index Works
The Ice Bofa Asia Dollar High Yield Corporate China Issuers Index is market capitalization-weighted, which means that the larger the size of the bond issuance, the higher the weight it has in the index. The index includes bonds denominated in U.S. dollars issued by Chinese companies with a credit rating below investment grade. The index is rebalanced monthly and includes only bonds that have a remaining maturity of at least one year.
Benefits of Investing in the Index
The Ice Bofa Asia Dollar High Yield Corporate China Issuers Index provides investors with a way to gain exposure to Chinese high-yield corporate bonds, which offer higher yields than investment-grade bonds. The index also provides investors with diversification benefits as Chinese high-yield corporate bonds are not highly correlated with other asset classes such as equities and investment-grade bonds. However, investors should be aware that high-yield corporate bonds are more susceptible to default risk than investment-grade bonds.
Performance of the Index
The Ice Bofa Asia Dollar High Yield Corporate China Issuers Index has delivered strong returns since its inception. In 2019, the index returned over 14%. However, the index also experienced significant drawdowns during periods of market stress, such as the global financial crisis in 2008 and the COVID-19 pandemic in 2020.
Investing in the Index
Investors can gain exposure to the Ice Bofa Asia Dollar High Yield Corporate China Issuers Index through exchange-traded funds (ETFs) and mutual funds that track the index. These funds provide investors with a low-cost and convenient way to invest in Chinese high-yield corporate bonds.
Risks of Investing in the Index
Investing in the Ice Bofa Asia Dollar High Yield Corporate China Issuers Index carries risks such as credit risk, interest rate risk, and default risk. The credit risk is the risk that the issuer of the bond may default on its payment obligations. The interest rate risk is the risk that the value of the bond may decline if interest rates rise. The default risk is the risk that the bond issuer may not be able to pay the interest or principal on time.
Conclusion
The Ice Bofa Asia Dollar High Yield Corporate China Issuers Index is a benchmark for investors who want to invest in Chinese high-yield corporate bonds. The index provides investors with exposure to a diversified portfolio of high-yield corporate bonds issued by Chinese companies. However, investors should be aware of the risks associated with investing in high-yield corporate bonds and should seek professional advice before investing.