1st LD-Writethru-Economic Watch: Chinese bonds gain popularity among overseas investors

0 Comment(s)Print E-mail Xinhua, May 08, 2019
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BEIJING, May 8 (Xinhua) -- Overseas investors continued to buy Chinese yuan-denominated bonds in April, the first trading month after China's yuan-denominated bonds were added to the Bloomberg Barclays Global Aggregate Index (GAI), as the world's third largest bond market is opening up wider.

At the end of April, the total amount of yuan bonds owned by overseas institutions under the depository of the China Central Depository & Clearing Co. (CCDC) surged 28.62 percent year-on-year to 1.53 trillion yuan (about 226.27 billion U.S. dollars), the CCDC said.

The amount edged up by 1.79 percent from the end of last year, while government and policy bank bonds remained the most popular for overseas investors.

Starting April 1, Chinese bonds will be added into the Bloomberg Barclays GAI over the next 20 months, after which yuan bonds held by foreign investors registered stable growth in the same month, according to Shanghai Securities News.

When fully implemented, China will be 6.1 percent of the index, and a Citi research report predicted that the Chinese market would attract total inflow of 151 billion U.S. dollars.

The yuan bond market, showing further potential with its diversity and lack of efficiency, is likely to offer payback higher than the market level, Andrew Rymer, investment communications specialist at Schroder's, was quoted as saying by the paper.

The strong growth in overseas holdings of yuan bonds was also boosted by the Bond Connect program, a market access scheme launched in July 2017 that allows overseas investors to invest in the Chinese mainland's interbank bond market using financial institutions on the mainland and in Hong Kong.

Trading volume under the program in April saw a 60-percent increase month-on-month rising to 116.9 billion yuan, according to the China Foreign Exchange Trade System and National Interbank Funding Center.

Representing an average daily trading volume of 5.31 billion yuan, the number of transactions under the bond hit a record high of 1,692 in April.

More registered institutional investors across the globe chose the Bond Connect to access the Chinese bond market by the end of April, with the total number jumping to 845 from 503 at the end of 2018.

Chinese government bonds are increasingly fitting into investor safe-haven demands prior to further fluctuations of the global market, said Hayden Briscoe, head of Asia Pacific fixed income at UBS Asset Management. Enditem

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