Market Vectors’ Fran Rodilosso on China’s Rate Cut; Growing Access to the Mainland’s Fixed Income Markets

While the opening of China’s A-share market to foreign investors and the launch of the Shanghai-Hong Kong Stock Connect (Stock Connect) have been dominating the news, China’s onshore bond market is also becoming increasingly accessible, creating new opportunities for foreign investors to generate potential income and diversify their fixed income portfolios, according to Fran Rodilosso, Senior Investment Officer for Market Vectors fixed income ETFs.

“Currently with real interest rates in China still at attractive levels and decelerating growth, the Chinese government appears to have both room and incentive to help foster lower rates. We saw that happen last week, when the People’s Bank of China (PBOC) cut the one-year lending and deposit rates by 0.40 and 0.25 basis points, respectively.” While China has taken other measures to add liquidity to its markets at various stages, as pointed out by Rodilosso, these have been the first rate cuts since 2012.

“The rate cuts are the latest measures aimed at engineering a ‘soft landing’, as China’s growth decelerates from astronomical levels. The government will likely follow with other measures, including lowering reserve requirements for banks. The hope for policy makers is that it filters through to final demand and provides some spark for the more precarious sectors of the economy, such as housing. Generally this move is credit positive,” Rodilosso said.

“A secondary effect is that the market may anticipate further rate cuts in the future, perhaps in 2015, which may keep downward pressure on at least the front end of the curve and be generally positive for fixed income. As one may expect, the currency weakened initially on this news though,” the Market Vectors’ Senior Investment Officer added.

Rodilosso noted that China continues to represent a significant portion of global economic growth, and that while its domestic capital markets have been evolving in a way to help fund that growth, access for foreign investors has historically been limited. Now, in the equity market, that access is being enhanced, albeit gradually, as with the launch of the Stock Connect program last week.

“Access to China’s bond markets, however, remains more challenging, which is a reason why Market Vectors launched an ETF that taps into the country’s onshore fixed income market through the Renminbi Qualified Foreign Institutional Investor (RQFII) program which is currently the only available direct route,” Rodilosso said.

Market Vectors® ChinaAMC China Bond ETF (NYSE Arca: CBON), is the first U.S.-listed ETF designed to provide investors with direct access to China’s onshore bond market. The Fund seeks to invest in all major segments of the Chinese fixed income markets, including sovereigns, policy banks, and highly-rated corporate bonds.

Mr. Rodilosso has over 20 years of experience trading and managing risk in fixed income investment strategies, including more than 17 years covering emerging markets. In addition to CBON, the Market Vectors ETFs under his watch are Investment Grade Floating Rate ETF (NYSE Arca: FLTR®), Treasury-Hedged High Yield Bond ETF (NYSE Arca: THHY®), Emerging Markets Aggregate Bond ETF (NYSE Arca: EMAG®), Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM®), Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC®), Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL®), and International High Yield Bond ETF (NYSE Arca: IHY®). As of October 31, 2014, the total assets for these ETFs amounted to approximately $1.7 billion.

Please note that the information herein represents the opinion of the portfolio manager and these opinions may change at any time and from time to time. Not intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. ©2014 Van Eck Global.

About Market Vectors ETFs

Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family is one of the largest providers of ETFs in the U.S. and worldwide.

Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and managed approximately $32.3 billion in investor assets as of September 30, 2014.

Risk Considerations

There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health.

An investment in the Market Vectors® ChinaAMC China Bond ETF may be subject to risks which include, among others, risk of investing in Chinese securities, particularly Renminbi-denominated (RMB) bonds, credit risk, interest rate risk, sovereign and quasi-sovereign defaults, adviser and sub-adviser risk, non-diversification risk, risks associated with non-investment grade securities and risk of the RQFII regime, all of which may adversely affect the Fund. Investments in mainland China may be subject to local customs, duties and rights of ownership, which might change at any time should policy makers deem them in China’s best interest. As the Fund invests in securities denominated in Chinese Renminbi, changes in currency exchange rates may negatively impact the Fund’s return. Foreign and emerging markets investments are subject to risks, which include changes in economic and political conditions, foreign currency fluctuations, changes in foreign regulations, changes in currency exchange rates, unstable governments, and limited trading capacity which may make these investments volatile in price or difficult to trade. The Fund’s assets may be concentrated in a particular sector and may be subject to more risk than investments in a diverse group of sectors. For a more complete description of these and other risks, please refer to the Fund’s prospectus and summary prospectus.

Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called “creation units” and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in cash. Shares may trade at a premium or discount to their NAV in the secondary market.

Diversification does not assure a profit nor protect against loss.

Investing involves substantial risk and high volatility, including possible loss of principal. Bonds and bond funds, in general, will decrease in value as interest rates rise. An investor should consider the investment objective, risks, charges and expenses of the Fund carefully before investing. To obtain a prospectus and summary prospectus, which contain this and other information, call 888.MKT.VCTR or visit marketvectorsetfs.com. Please read the prospectus and summary prospectus carefully before investing.

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