Select a page

Banking News

Chinese bond market attraction grows among foreign investors

Chinese bond market attraction grows among foreign investors

(12 June 2019 - China) Global investors are reconsidering asset allocation in Chinese bonds after the announcement of their inclusion in a key Bloomberg index despite escalating Trade War tensions with the US and a slowing domestic economy.

Chinese government and policy bank bonds are being added to the Bloomberg Barclays Global Aggregate Index, which is tracked by over US$2 trillion of assets. The bonds will be added to the index over a two year period and once the bonds have been added completely, China's weighting in the index will jump to six percent. Bloomberg stated that will make China's local currency bonds the fourth largest currency component after the greenback, Euro and Japanese Yen.

Foreign investors have recently expanded into China's financial markets as Beijing slowly liberalises capital markets for investment and improved trading infrastructure. According to data from credit rating agency Moody's, the total yuan bonds held by foreign institutional investors at the end of January was US$262 billion, an increase of more than 50 percent year-on-year. "Foreign investors have been increasing their allocation of bonds over the past five years. As a result, bonds carry the heaviest weighting among all RMB financial asset classes held"

"Foreign investors were almost completely absent a decade ago," said Shaun Roache, S&P Global Ratings Asia Pacific Chief Economist. "Foreign investors now hold about two percent of the bonds outstanding. This is still low by major bond market standards, but we believe we have reached an inflection point"

Comment on this article

 

Your comments will not be published. Required fields are marked *

 

Please enter the word you see in the image below:


Subscribe

Subscribe to our mailing list

Sign up now to keep up-to-date with the latest
market news and insights in B2B banking.

* indicates required

For more information please read our Terms and Conditions and Privacy Statements.