Fixed income investors eyeing China’s bond market, survey finds
Asset managers expect to almost triple their exposure to the mainland’s domestic fixed-income market within a year, according to Deutsche Bank
International fixed income investors are preparing to substantially increase their exposure to China’s domestic bond market, a survey from Deutsche Bank has shown.
According to the survey, the aggregate share of respondents’ Asian local-currency bond portfolio allocated to onshore renminbi is expected to reach 13 per cent a year from now, and 26 per cent in five years, up from the present level of just 5 per cent.
The respondents were primarily Asia-based senior staff at global asset management firms.
China’s interbank bond market is the third largest in the world, but until this year it had been closed to most international investors. Deutsche Bank research estimates that foreign investors’ share of domestic interbank holdings was about 1.52 per cent in August.
However, in the last 18 months, China has been seeking to open up its bond markets further to overseas investors. In February this year, China’s authorities announced that a wide range of foreign institutional investors would be given quota-free access to the Chinese Interbank Bond Market (CIBM), and in May the People’s Bank of China published implementing rules that a note from BNP Paribas at the time described as “even more flexible than had been expected.”
At present, the CIBM represents over 90 per cent of the total market for Chinese bonds.
Over half of respondents to the Deutsche Bank survey indicated that the shift to a registration-based, quota-free system for CIBM market access had brought forward their institution’s timeline for increasing investment in the market.