A Bloomberg survey conducted among banking and investing professionals in Hong Kong and Singapore suggests that more market participants (67%) expect to invest in Chinese onshore bonds in 2019. Only eight percent of 180 respondents said they will sell their Chinese onshore bond holdings this year.
Panelists discussing opportunities in China's bond market at Bloomberg's "Navigate the New Silk Road" , Feb 19 Hong Kong,
The survey was conducted at Bloomberg's annual "China: Navigate the New Silk Road" events in Hong Kong (Feb 19) and Singapore (Feb 21), where more than 180 market participants convened to discuss developments in China's bond market.
The top reason cited by respondents for increasing their investments in the onshore Chinese bond market was the inclusion of Chinese RMB-denominated government and policy bank securities in the Bloomberg Barclays Global Aggregate Index starting April 2019, phased in over a 20-month period.
Investors also recognized the low correlation Chinese onshore bonds have with developed markets, citing portfolio diversification as another top reason for investing.
"2019 is going to be a tipping point for China's bond market," said Bing Li, Head of China for Bloomberg. "This is primarily driven by four factors that contribute to an investable bond market - ongoing policy driven regulation, market access, investor demand and benchmarks. The upcoming index inclusion in April, which is a real vote of confidence for investors, is arguably the biggest development in China's bond market since its inception."
In terms of concerns investing in the world's second largest bond market, the most cited reason was credit risk (27%) and liquidity issues (21%). Participants in Singapore (28%) were more concerned with operational issues such as trading hours, taxation, language when accessing the onshore market, citing this as the second top reason.
Bloomberg recently launched new access channels for China's bond market via CIBM Direct and Bond Connect, the two most popular schemes used by offshore investors.
The first trades on Bloomberg channels took place on February 21 and 22, 2019. ICBC Ltd Singapore Branch and LUSO International Banking Co., Ltd, used Bloomberg CIBM Direct function to complete three interbank deposit receipt transactions with their onshore agent banks ICBC and Bank of China respectively. Bank of China (BOC) HK Branch and Bank of China (Hong Kong) Limited were the first overseas institutions to complete the first trades via Bloomberg Bond Connect and both traded with the onshore dealer Bank of China.
In addition to providing global benchmark indices and market access channels, Bloomberg has build a number of sophisticated tools to help investors make informed decisions. With RMB Bond Solutions, investors can analyze the China bond market with a set of tools around critical fixed income data, real time curves and economic indicators. Bloomberg's trade order management solution or TOMS allows market makers to provide pricing information on the Bloomberg Terminal, providing transparency to global investors.
Bloomberg Terminal subscribers can visit RMB <GO> to learn more about our holistic solutions for investing in China bond market.
