Bond Connect seen boosting fund inflows

Updated 2017-09-11 09:30:41 China Daily

Renminbi-denominated bonds will become one of the preferred investment options for international investors as China now offers a channel for offshore investors to access local notes, potentially boosting fund inflows in the future, said experts.

The Bond Connect, which was launched in July in Hong Kong, is expected to funnel hundreds of billions of dollars into the Chinese mainland's trillion interbank bond market, said Zong Liang, a chief researcher at Bank of China, in a research note.

Qualified overseas investors now trade in the mainland's treasury bonds, local government bonds, institutional bank bonds and commercial bank bonds.

Standard Chartered Bank forecast that China's onshore bond holdings will rise to 1 trillion yuan (3 billion) by this year-end.

Morgan Stanley predicted that the link will put Chinese government bonds on the world's benchmark bond index within the next 36 months, stimulating inflows of 0 billion to 0 billion into the Chinese market.

Citigroup Inc, the fifth foreign institution to receive approval to underwrite nonfinancial corporate bonds in China's interbank market, said there may be "significant" inflows into China's debt market from the Bond Connect.

"We see increasing interest from foreign institutional investors in the China interbank bond market, including corporate bonds," Bloomberg quoted Eduardo Delascasas, Citigroup's China head of markets and securities services in Shanghai, as saying.

China's overall fixed-income market is estimated at 67.6 trillion yuan, which global institutional investors can now access. And capital inflows are rising steadily, said Zong.

But the program may not bring massive foreign capital to China's bond market in the short term, he said.

On July 3, the first day of a trial of the platform, 70 overseas institutions clinched 142 deals worth 7.05 billion yuan, reflecting foreign investors enthusiasm for Chinese bonds.

Volumes, however, fell later to a stable or fluctuation-free daily average of 800 million yuan.

Lacking in experience in the China market, most overseas institutions are still exploring ways of maximizing the potential of the still-new investment channel, said Zong.

In July, Chinese enterprises issued a large amount of US dollar debt overseas, which foreign institutions invested in directly. At the same time, deleveraging in China created risk to bond prices, diluting players' passion for them, he said.

Also in the News

Nicole Kidman Recalls Oscar Glory: Loneliest Time
Showbiz2016/06/16 13:58December 18 2017 05:37:00

Nicole Kidman Recalls Oscar Glory: Loneliest Time

Attending Shanghai International Film Festival, Nicole Kidman talks about her role in "Grace of Monaco".

Labor Day Travel Peak Starts
Also in the News2014/05/01 12:16December 18 2017 05:37:00

Labor Day Travel Peak Starts

Johnny Depp Delivers a Speech 'Evolve the Future' in 'Transcendence'
Also in the News2014/04/18 13:18December 18 2017 05:37:00

Johnny Depp Delivers a Speech 'Evolve the Future' in 'Transcendence'

Hollywood star Johnny Depp's speech in the upcoming new film "Transcendence" has been disclosed on Friday, April 11th.

Most Watched

News:
China World Business Sports Showbiz Audio
Video:
C4 My Chinese Life The Sound Stage China Revealed Showbiz Video Travel Video
Photos:
China World Fun Travel Entertainment Sports
Travel:
Beijing Shanghai Guangzhou
Lifestyle:
Live Music Opera & Classical Movies Traditional Shows Exhibitions
Learn Chinese:
Chinese Studio Living Chinese Everyday Chinese Just For Fun Chinese Culture Buzzwords