Foreign investment increased share of Chinese bonds for 18 consecutive months
According to the monthly statistics released by China Bonds and Shangqing, in May, foreign net holdings in China's bond market increased to 114.594 billion yuan, and the monthly net holdings reached a record high. At the same time, the total amount of foreign capital held reached 2,426.029 billion yuan, accounting for 2.61% of the bond market, which also set a new historical record.
Monthly data of Bond Connect also showed that foreign investors' buying sentiment in May rose sharply, with 5,824 transactions and 468.2 billion yuan in transactions in the month, and an average daily transaction of 26 billion yuan, a record high.
As of the end of May, foreign capital has increased its holdings of Chinese bonds for 18 consecutive months. Since the beginning of this year, the momentum of foreign investment in Chinese bonds has not changed. On the basis of net purchases of Chinese bonds in January, from February 28, nine Chinese government bonds were included in the JP Morgan Chase Global Emerging Markets Government Bond Index. In the same month, the net purchase of foreign capital increased significantly. The pace of foreign investment holdings slowed slightly in March, and then continued to buy, and reached a new high in May.
Hu Yi, head of Jingshun Asia Credit Research, believes that one of the reasons driving foreign investors to increase their allocation is the rate of return. The gap between the yields of Chinese bonds and the yields of major developed countries has further widened. The current 10-year Treasury yield spread between China and the United States is about 215 basis points, which is the highest level in the past 10 years. At the same time, China's domestic bonds and the world's major interest rate debt and credit bond markets show a relatively low correlation, which means that adding Chinese bonds to the portfolio will help diversify the investment portfolio and diversify risks; The world’s major bond index. This has further increased the investment momentum of international investors, and China has better controlled the epidemic situation and further strengthened the confidence of international investors.
On June 18, Pan Gongsheng, deputy governor of the People's Bank of China and director of the Foreign Exchange Bureau, said that at present, China's bond and stock market is the second largest in the world, with more than 160 trillion yuan, and has been included in multiple mainstreams. International index. The allocation of RMB assets by international institutions has reached 6.4 trillion yuan, and has grown at an average annual rate of more than 20%. In particular, the holding of domestic RMB bond assets by foreign investors has grown at an average annual rate of nearly 40% in recent years.
Recently, China has integrated investment channels in the bond market, canceled QFII and RQFII quota management, expanded the trial of the Qualified Domestic Limited Partner System (QDLP) and Qualified Overseas Limited Partner System (QFLP), and the regulatory authorities have liberalized the share ratio restrictions of foreign financial institutions. All are important measures to expand the opening up of the onshore market.
"Since 2017, we have increased the proportion of investment in Chinese government bonds every year." Huang Jiacheng, managing director of Jingshun and head of fixed income in the Asia Pacific region, said that since the epidemic, the performance of Chinese government bonds has been relatively stable compared to the assets of other countries. Attract many emerging market funds and developed market funds to invest.
Data show that in May, 12 new foreign institutional entities entered the inter-bank bond market. As of the end of May, a total of 828 foreign institutional entities entered the market, of which 450 entered the market through direct investment channels, 548 entered the market through the "bond link" channel, and 170 entered the market through both channels.
Not only treasury bonds, foreign investors' interest in China's credit bonds is also rising, and the investment target's credit rating tends to sink. Huang Ka-shing believes that the overseas fund's investment in Chinese bonds is divided into four stages: the first stage, the main target is interest rate debt; the second stage begins to look at the relatively stable, 3A and 2A+ rated credits such as urban investment bonds and credit bonds Debt; the third stage and the fourth stage, foreign capital may vote for 2A, 2A-rated bonds. "Many foreign investors are very interested in credit bonds and are already increasing investment." Huang Jiacheng said.
"Our judgment on China's accelerated capital market opening up to absorb nearly 100 billion US dollars of bonds and stock market inflows every year has not changed." Morgan Stanley Chief Economist Xing Ziqiang believes that overseas investors are now very interested in the Chinese bond market. Globally embracing zero interest rates, negative interest rates, and quantitative easing, China's sovereign assets, national debt, still show relatively strong returns.
Xing Ziqiang suggested that in this process, the reform of the financial market and the growth of the local currency market should be included in the fast lane, such as the establishment of the yield curve, the increase in the supply of long-term government bonds, and the need to increase some risk hedging tools, including interest rates Swaps, etc. This will help to increase the RMB asset market and ultimately increase the attractiveness of international funds. From this perspective, China's bond market has great potential to attract foreign investment. (Economic Daily·China Economic Net reporter Chen Guojing)