$10 tril­lion China bond mar­ket ‘can­not be ig­nored’

The Star Early Edition - - INTERNATIONAL - Denise Wee

BLACK­ROCK, the world’s largest money man­ager, says in­vestors can­not ig­nore China’s on­shore bond mar­ket, which has reached the $10 tril­lion (R130 tril­lion) mark.

“It’s ab­so­lutely crit­i­cal if you’re a fixed-in­come in­vestor to have a closer look at the Chi­nese bond mar­ket and then fig­ure out the ac­cess as well as the po­si­tion­ing,” Neeraj Seth, head of Asian credit at the as­set man­ager, said yes­ter­day.

For­eign in­vestors own only about 3 per­cent of China on­shore notes, a sig­nif­i­cantly lower pro­por­tion than in other mar­kets. The coun­try’s reg­u­la­tors have been open­ing the world’s third-largest bond mar­ket to for­eign in­vestors. Trad­ing on China’s new bond link to the rest of the world started this month and the Peo­ple’s Bank of China opened in­ter­bank bond trad­ing to most types of in­vestors last year.

How­ever, the process of rais­ing for­eign par­tic­i­pa­tion in on­shore bonds will be grad­ual and China’s notes need to be in­cluded in ma­jor in­dexes to drive flows, said Seth.

Cit­i­group In­dex LLC said in March that Chi­nese on­shore sov­er­eign bonds are set to join some of its gauges but omit­ted them from its key World Gov­ern­ment Bond In­dex. Bloomberg Bar­clays In­dexes, owned by Bloomberg, over­hauled its China fixed-in­come gauges and started a Global Ag­gre­gate+ China in­dex in March, while stop­ping short of ad­ding the na­tion to ma­jor bench­mark in­dexes. In­clu­sion in the ma­jor in­dexes will likely be in 12 to 18 months. Black­Rock is long on the Chi­nese yuan, which has ad­vanced 2.8 per­cent to the dol­lar this year.

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