Two so-called Chinese 'Dim Sum' bond exchange traded funds have come to market within the same number of days, as another was pulled due to market volatility. 

Guggenheim Investments last week launched a new fund that taps into China's growing 'Dim Sum' bond market, the day before Invesco PowerShares launched a bond fund focused on yuan-denominated Chinese debt. The moves come as a result of the ETF industry looking to offer investors non-dollar denominated fixed-income vehicles with exposure to China's high growth. 

A dim-sum bond is denominated in Chinese yuan and issued and settled outside of China. Dim sum bonds are attractive to foreign investors who want exposure to yuan-denominated assets, but are restricted by China's capital controls from investing in domestic Chinese debt.

The Dim Sum bond market was introduced in 2007 when the People's Republic of China-incorporated financial institutions were first allowed to issue yuan-denominated bonds offshore. Since then, the market for Dim Sum bonds has seen significant growth, particularly since its deregulation in July 2010. Dim Sum bonds are generally issued in Hong Kong by governments, agencies, supranationals and corporations.

The Guggenheim Yuan Bond ETF is modelled on the AlphaShares Yuan Bond Index, which covers bonds that are eligible for investment by US and other foreign investors. The securities included are RMB denominated, whether issued by Chinese or non-Chinese issuers and traded in the secondary market.

"Yuan bonds could potentially not only provide income at a time when short-term rates are near zero in the US but also could give investors some capital appreciation if the Yuan continues to appreciate," said Burton Malkiel, the head of the AlphaShare Index committee and founding member of AlphaShares LLC.

Guggenheim is working to diversify its overall portfolio, given that, historically, many foreign currency have shown a low correlation to the US equity and fixed income markets. The Index includes bonds isued by mainland Chinese entities with a minimum of RMB1 billion outstanding par value, as well as bonds issued by select non-mainland Chinese equities, which have no minimum requirement. All issues and issuers must have an investment grade ratings by the top agencies. Bonds must have at least one year maturity for inclusion in the Index. 

Meanwhile Invesco PowerShares Capital Management's Chinese Yuan Dim Sum Bond Fund started trading on Friday. It has an expense ratio of 0.45 per cent and is expected to issue monthly distributions.

"The Dim Sum bond market offers attractive coupons, and the ability to participate in the appreciation potential of the yuan over time," said Ben Fulton, Invesco PowerShares managing director of global ETFs. "We believe the PowerShares Chinese Yuan Dim Sum Bond Portfolio provides investors with both convenient, and low cost access to the yuan-denominated debt market, he added"

The PowerShares Chinese Yuan Dim Sum Bond Portfolio is based on the Citigroup Dim Sum Bond Index. The Fund will normally invest at least 90 per cent of its total assets in Chinese yuan-denominated bonds that comprise the Index.

While some forecast huge growth in demand, in the wake of massive global currency swings there are signs that interest could be short-lived. Volatility in the global financial markets last week forced Malaysian bank Khazanah Nasional to delay its Dim Sum debut, according to media.

The market volatility triggered a widespread selloff of long currency bets, as the offshore yuan rate slumped to a record low against the dollar.

The Malaysian Government's investment arm Khazanah - was forced to shelve the deal after opening the books on the suck on Friday.