Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

China’s Beaten-Down Bonds Set to Enter FTSE Russell Index

ForexSep 23, 2020 04:45PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters. China’s Beaten-Down Bonds Set to Enter FTSE Russell Index

(Bloomberg) -- Foreign investors are likely to have a new channel to invest in China’s government bonds.

FTSE Russell will announce whether it will add the nation’s sovereign debt into its indexes after U.S. markets close on Thursday, a year after rejecting the notes. Morgan Stanley (NYSE:MS) puts the odds of inclusion this time round at 90%.

With yields near zero for most developed nation bonds, the 3.1% offered by China’s benchmark 10-year bond has been pulling in investors from Singapore to the U.K. Inflows into the nation’s debt market from overseas investors jumped nearly 40% a year since 2017 to a record $383 billion by the end of June, central bank data as of the end of June showed. That’s yet to have much impact on the bonds given foreigners account for less than 3% of the $16 trillion market.

According to Morgan Stanley, inclusion by FTSE Russell will likely spur inflows of as much as $90 billion from September 2021. FTSE Russell is the last of the three main index compilers to consider adding Chinese debt after Bloomberg Barclays (LON:BARC) and JPMorgan Chase (NYSE:JPM) & Co. Bloomberg LP owns Bloomberg Barclays and Bloomberg News.

Last time around, FTSE Russell cited the need for greater secondary market liquidity, as well as increased flexibility in foreign exchange execution and the settlement of transactions to meet inclusion criteria. In April the index compiler acknowledged that China had addressed calls to increase market accessibility and provided investors with greater currency trading options and improvements to liquidity.

“All of this additional flexibility and feasibility of hedging are making offshore investors more comfortable about entering into the onshore bond market for capital investment,” said George Sun, head of global markets for Greater China at BNP Paribas (OTC:BNPQY) China Ltd.

Despite inflows from foreign investors, Chinese bonds are poised to fall for a fifth straight month in September, making them the worst performer in the Asia Pacific region. The notes have been under pressure amid concern about tighter liquidity, a cautious central bank that has refrained from cutting interest rates and growing appetite for riskier assets as an economic recovery gathers pace.

As a result, China’s 10-year government note offers a yield premium of about 240 basis points over U.S. peers, near a record high. That could help attract “persistent and large” fund inflows, Citigroup Inc (NYSE:C). said in a note this week.

Optimism that the nation’s debt will be added to the FTSE Russell index has been among factors driving a rally in China’s currency, which is on track for its biggest quarterly gain since 2008.

“China’s bond market internationalisation is happening regardless of FTSE Russell inclusion which is but an endorsement of a structural shift well underway,” said Wilfred Wee, a portfolio manager at Ninety One Singapore Pte Ltd.

©2020 Bloomberg L.P.

China’s Beaten-Down Bonds Set to Enter FTSE Russell Index
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email