Be optimistic about China's Economic Development and accelerate the influx of Foreign Capital into the domestic Bond Market
Beijing, 7 Nov (Xinhua)-- be optimistic about China's economic development and accelerate the influx of foreign capital into the domestic bond market
Xinhua News Agency reporter Liu Kaixiong
Economic growth is stable, transformation and upgrading are accelerated, and the policy of opening to the outside world is frequent. Recently, a series of latest financial data show that foreign institutions are speeding up their investment in China's bond market and are optimistic about the prospects of China's economic development.
By the end of October, the face value of bonds entrusted by overseas institutions had reached 1.80613 trillion yuan, with an increase of 11.585 billion yuan in the month, an increase of 19.82 percent over the same period last year, according to data released by the China Clearing Corporation on November 4. Since December 2018, foreign investors have increased their holdings of Chinese bonds for 11 months in a row, continuing to set a new record.
Earlier, data released by the people's Bank of China on October 31 showed that by the end of the third quarter, foreign holdings of Chinese stocks and bonds had reached 1.8 trillion yuan and 2.2 trillion yuan respectively, both reaching new highs. Compared with the end of 2018, the position increased by 53.56% and 23.4%, respectively. According to statistics from the State Administration of Foreign Exchange, in the first three quarters, foreign investors net increased their holdings of Chinese bonds by US $71.3 billion and their holdings of listed stocks by US $18.5 billion.
A series of data show that the influx of foreign capital into the domestic bond market is accelerating, and RMB assets are becoming increasingly attractive in the international market. The market generally believes that RMB bond assets are favored by international investors. Although there are short-term factors, more of them are due to the steady performance of China's economy and the further expansion of the financial opening-up policy. International capital is optimistic about the medium-and long-term factors brought about by the long-term development of China's economy. As Zhao Qingming, an expert on international finance, said, bullish on medium-and long-term development in order to maintain a long period of sustained inflow.
10-year treasury bonds are generally considered to be the benchmark for a country's long-term interest rates. In the past year or so, the Fed has cut interest rates three times in a row, widening the spread between 10-year Treasury yields to about 150 basis points. Xie Yaxuan, chief macro analyst at China Merchants Securities, believes that from the perspective of October, the external environment has warmed up in the short term, the RMB has appreciated slightly and the pressure of devaluation has dropped significantly. Spreads between China and the US are expected to remain high at 140 basis points and the yield advantage of renminbi bonds remains clear.
But more importantly, China's financial market has been continuously opened to the outside world, and the introduction of a series of policies has really broadened the ways for foreign institutions to invest in China's financial market. From the connectivity between the domestic market and the overseas market, to liberalizing the ceiling on the proportion of foreign investors in domestic financial institutions, and abolishing the restrictions on the investment quota of qualified foreign institutional investors ((QFII)) and RMB qualified foreign institutional investors ((RQFII)).
A variety of important international financial indices have poured in. Mainstream international financial indexes, including the Mingsheng Index, the Barclays Index and the FTSE Index, have included China's stock and bond markets in their index systems, which is a sign of global investors' recognition of China's financial market. At the same time, it has also promoted the pace of further integration of China's financial market into the global financial market.
As investors become increasingly worried about the prospects for global economic growth and central banks cut interest rates more than expected, market money is pouring into safe-haven assets, according to a report from UBS Wealth Management. The total number of negative yield bonds around the world continues to hit new highs. The high yield on Chinese government bonds is one of the few "value depressions" for international institutions. And as Chinese bonds and stocks are more widely included in the international mainstream index, the huge investment value of China's bond market is more prominent.