60 seconds with Ricco Zhang, Senior Director APAC at ICMA on China Bonds
China’s government bond market has gone from strength to strength, becoming too big to ignore. It combines attractive income, digital economy, portfolio diversification and capital appreciation potential. With a rapidly growing economy, we had a quick fireside chat with Ricco Zhang, Senior Director APAC at ICMA to understand the factors that drive this growth and potential for foreign investors.
Top 3 reasons why China bonds are appealing?
First of all, seeking higher returns in the low yield environment is one of the largest challenges faced by international investors. Compared with the sovereign bonds in developed markets, Chinese government bonds and policy bank bonds do offer attractive yields, even after hedging the FX risk.
Second, China’s steady economic recovery from COVID-19 is also reassuring, laying a strong fundamental and macroeconomic environment for the financial markets. Thirdly, research has shown that Chinese bonds have lower correlation with those of developed economies, making the portfolio of an international investor more diversified.
How can global investors best gain exposure to this rising asset class?
Chinese government bonds have been included into the three major fixed income indexes – by Bloomberg Barclays, J.P. Morgan, and FTSE Russell. It is a global trend that international investors are increasingly allocating to RMB assets and Chinese bonds. Depending on the objectives of individual investors, they may choose to gain exposure to the Chinese bond market by passively tracking the bond indexes or actively investing in China’s bond markets. The Chinese regulators have been substantially improving and facilitating international investors to access the onshore bond markets.
Where do you see the biggest opportunities in Chinese Fixed Income?
It is interesting to see how the credit rating reform will evolve in the onshore markets. The Chinese regulators have given clear signals on developing a more market-based credit rating system, oriented around and backtested with probability of default. It is also a general direction of travel to de-emphasize external credit ratings as the determining factor in investment decisions and encouraging a better price discovery process.
Why is FIFX APAC Leaders Summit 2021 a must not miss event?
It is an excellent opportunity to listen to the discussion of leading industry experts and gain industry insights first-hand.
Want to learn more?
Join Ricco as he moderates a keynote interview with Mitul Kotecha, Chief Emerging Markets Asia and Europe Strategist at TD Securities and Iris Pang, Chief economist, Greater China at ING Wholesale Banking on ‘How can you take advantage of increased access to bond trading opportunities in China?’ at the Fixed Income & FX Leaders Summit APAC on Thursday 30th September 2021 at 11.40am SGT.