MarketWatch: China bond market reached a milestone at the start of April

April 1, 2019 | Monday

Chinese Bonds


On Monday, domestic bonds in China spread, becoming a part of a major global index. That marks a significant achievement bringing China's financial markets opportunity.

According to analysts, there is an estimated inclusion pull of about $150 billion foreign inflows towards China's approximately $13 trillion bond market. That of which is at the third biggest bond around the globe following the United States and Japan. In about 20 months after a number of onshore Chinese bonds are to be added in Bloomberg Barclays Global Aggregate Index.

Just last year, China's yuan dominates on stock trading within the mainland. The index inclusion is the most up to date move in which opens up China's financial market on a global investor. In addition, China also began its "connect" programs allowing investors to purchase shares and bonds via Stock market of Hong Kong.

Justin Chan, HSBC's co0head of global markets in the Asia Pacific, stated, “Today marks an important milestone as China’s capital markets continue to find their place in the global investment mainstream."

There are a total of 364 bonds to issue by the Chinese government which will sum in Bloomberg Barclays Global Aggregate Index. They are also called the policy banks. It is the lenders set up supporting the government's policies and development plans.

According to Bloomberg, upon addition of the bonds on the global benchmark, the country's index is to increase at about 6 percent. As a result, the Chinese yuan will be the fourth-largest currency around the globe.

However, even with the Chinese bonds huge size, they still are under-owned by global investors. Furthermore, according to Khoon Goh, head of Asia Research in ANZ bank, the Chinese central government bonds holding the highest foreign ownership makes it nearing to 8 percent on its Monday report. That of which is still lover comparing to the 35 percent o the Unit.


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