Sta­ble yuan, rel­a­tively high on­shore rates help lure money home from overseas

New Straits Times - - Business -

FOR­EIGN in­vestors in­creased their hold­ings of Chi­nese bonds for a fifth con­sec­u­tive month last month, but of­fi­cial data showed lit­tle ev­i­dence that the coun­try’s one-month-old scheme to ease bond mar­ket ac­cess for overseas in­vestors has had a sig­nif­i­cant im­pact on trad­ing.

Hold­ings of Chi­nese trea­sury bonds by overseas in­vestors rose 37.82 bil­lion yuan (RM23.9 bil­lion) last month to 487 bil­lion yuan, ac­cord­ing to cal­cu­la­tions based on data from China Cen­tral De­pos­i­tory and Clear­ing Co, the of­fi­cial bond clear­ing house.

In­creases in hold­ings of Chi­nese trea­sury bonds and some cor­po­rate bonds off­set a net de­crease in hold­ings of pol­icy bank bonds.

Data showed that for­eign in­vestors in­creased their hold­ings of all Chi­nese bonds by 37.8 bil­lion yuan last month to 841.5 bil­lion yuan.

For the first seven months of the year, for­eign hold­ings of Chi­nese debt rose 62.6 bil­lion yuan.

While the monthly in­crease in the hold­ings of all Chi­nese bonds was the high­est since Septem­ber last year, the num­bers ap­pear to re­flect Chi­nese money lured home from overseas by a sta­ble yuan and rel­a­tively high on­shore rates, rather than sig­nif­i­cant new in­ter­est among for­eign buy­ers prompted by the Bond Con­nect scheme.

Yields on bench­mark 10-year Chi­nese gov­ern­ment bonds were at 3.644 per cent yes­ter­day, up 98 ba­sis points from lows in Oc­to­ber.

“In the early days, it was mainly the overseas firms of Chi­nese in­sti­tu­tions that were com­ing in (through Bond Con­nect). Later there should be real overseas in­sti­tu­tions. Overseas in­vestors need time,” said David Qu, mar­kets econ­o­mist at ANZ in Shanghai.

De­scribed by reg­u­la­tors as a sig­nif­i­cant step to­wards in­creas­ing co­op­er­a­tion be­tween cap­i­tal mar­kets in main­land China and Hong Kong, the Bond Con­nect scheme be­gan on July 3 with the open­ing of “North­bound” trade, al­low­ing el­i­gi­ble Hong Kong and overseas in­sti­tu­tions to buy and sell on­shore bonds. Reuters

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