Fixed income: China is opening up and this time, it’s real

29 Mar 2019

China’s opening-up of its bond market – the third largest in the world – to foreign investors marks a turning point. It should allow investors to access a broad range of new instruments, possibly index products and bond ETFs, and boost their currently modest presence in this market.

Foreign investor holdings in China’s bond market rose to 2.3% by the end of 2018, from 1.6% at end-2017. In the government bond market, foreigners held 8.1% by end-2018, up from 6% in April 2018. Earlier moves to open financial markets have included lifting curbs on the ownership of financial institutions and doubling the limit of the Qualified Foreign Institutional Investor programme.

This time, it’s real

As Jean-Charles Sambor, Deputy Head Emerging Market Fixed Income, and Jennifer Clarke, Investment Specialist for EM Fixed Income, argue in this webcast this time, it’s real. So, what does this mean for global investors?

During the 45-minute live presentation, they will also discuss these topics:

  • How China’s high-yield market is booming and how it has become the largest emerging high-yield market
  • How valuations in China’s banking sector are attractive compared to developed market counterparts
  • How we expect China to become a dominant source of alpha for active global investors

More on emerging markets

In this blog post, Jean-Charles argues that the 2019 economic environment is unlikely to impede emerging debt performance: economic growth should improve gradually and modestly and the interest-rate environment is still favourable. Emerging debt valuations still look good and the asset class can offer investors a more attractive risk-return than emerging equities. He feels now is the time to take a new look at emerging debt.

Also listen to Jean-Charles talking about the prospects for emerging market currencies. He discusses the end of the US Federal Reserve’s cycle of interest-rate rises and how this alleviates EM currencies of a significant headwind; how the differential in economic growth favours emerging markets relative to developed markets; where in emerging market debt he currently sees opportunities.