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Tags: foreigners | china | bond | yuan | debt

Foreigners Buy $10B of Chinese Bonds as Yuan Stabilizes

Foreigners Buy $10B of Chinese Bonds as Yuan Stabilizes
(Yong-hian-Lim/Dreamstime)

Thursday, 12 December 2019 09:30 AM EST

Net foreign inflows into China's giant bond market jumped nearly five-fold in November from a month earlier, as yield-hungry global investors snapped up nearly $10 billion worth of Chinese debt as the yuan stabilized against the dollar.

China's $13 trillion bond market, the world's second biggest, has had nine consecutive months of net foreign inflows. Analysts expect the trend to continue as Beijing steps up efforts to attract inbound capital.

Net foreign purchases of Chinese bonds totalled 69.9 billion yuan ($9.93 billion) in November, a surge from 10.8 billion yuan in October, according to Reuters calculations based on official data.

Gu Weiyong, chief investment officer at Shanghai-based asset manager Ucom Investment Co, said the yuan's stabilization against the greenback in recent months has revived foreign interest in Chinese bonds.

The Chinese yuan had edged up against the dollar in November for the third straight month, supported by investor optimism over prospects of a preliminary agreement to defuse the protracted trade war between Beijing and Washington.

"Foreign money will continue to gush in as Chinese bonds offer enviable yields for global investors."

China's benchmark 10-year treasury yields roughly 3.2%, compared with 1.8% for U.S. counterparts. Investors in Europe and Japan suffer from negative interest rates.

"With the Chinese market increasingly opening to international investors, this is a good opportunity for us," wrote Sandor Steverink, Head of Treasuries at Dutch pensions manager APG, which started investing in Chinese onshore bonds last month.

At the end of November, foreigners held nearly 2.2 trillion yuan worth of bonds, up one-fifth from the beginning of the year, according to data from the China Central Depository and Clearing Co and the Shanghai Clearing House. Foreign holdings, however, account for less than 3% of China's onshore bond market. Foreign flows into China have been supported by the 20-month phased inclusion of Chinese bonds in the Bloomberg Barclays Global Aggregate Index, which began in April.

JPMorgan said in September that it would add Chinese government bonds to its emerging market local currency bond index from February 2020.

© 2024 Thomson/Reuters. All rights reserved.


StreetTalk
Net foreign inflows into China's giant bond market jumped nearly five-fold in November from a month earlier, as yield-hungry global investors snapped up nearly $10 billion worth of Chinese debt as the yuan stabilized against the dollar.
foreigners, china, bond, yuan, debt
339
2019-30-12
Thursday, 12 December 2019 09:30 AM
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