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Today, China’s markets are evolving in important ways. The China onshore bond market is about to embark on another milestone index inclusion with FTSE World Government Bond Index, presenting global investors with an opportunity to participate in the world’s second largest bond market. RMB bonds, with their higher yield versus comparative bonds, can provide investors with diversification benefits and exposure to the growing opportunities in China’s dynamic economy. At HSBC Asset Management, we have been investing in China’s capital markets for over three decades. Join us as we navigate China’s markets and identify exciting investment opportunities along the way.
Why invest in China fixed income?
FTSE Russell is set to add China onshore bonds into its World Government Bond Index (WGBI) in November 2021, in a move that is expected to bring China’s country allocation from 0% to 5.58% by the end of the 3-year inclusion period
The inclusion of onshore Chinese bonds and equities in major global indices over the last few years has been an important step towards facilitating better representation of China’s sizable markets
China onshore bonds to be added in another milestone index inclusion
Source: FTSE Russell as of July 2021. Investment involves risks. Past performance is not indicative of future performance. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Asset Management accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purposes only.
China’s onshore bond and equity markets have grown at a remarkable pace over the last decade
The markets should continue to be supported by the continuous opening up of the onshore markets and increasing foreign investor interest
Tremendous growth for China onshore capital markets
Source: Bloomberg, Asianbondsonline, as of June 2021. For illustrative purpose only.
China has seen a broad based cyclical recovery post Covid while inflation remains moderate amid policy normalisation
China’s 14th Five Year Plan (FYP) aims to boost productivity and quality growth, with innovation and self reliance in supply chains as priorities
Innovation focus: R&D spending on the rise
NDRC refers to National Development and Reform Commission. Source: WIND, CEIC, Government Work Report (March 2021), HSBC Asset Management, April 2021. Investment involves risks. Past performance is not indicative of future performance. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Asset Management accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purposes only.
Mainland China’s 10-year government bond yield trades at a premium versus other major bond markets and versus most similarly rated markets
Investors hedging RMB China government bonds into domestic currencies may still enjoy a yield pick-up, while continuing to enjoy the benefits of China’s diversified interest rate cycle
China bonds offer potential yield premium versus other comparative markets
Source: Bloomberg, as of 31 August 2021. Credit rating is presented as Moody's rating / S&P rating. Investment involves risks. Past performance is not indicative of future performance. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC Asset Management accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purposes only.
A favorable balance of payments and stable macro environment support our positive outlook on the RMB
There has been a steady increase in the share of RMB in allocated reserves. With increasing integration of China’s financial markets, more assets globally should be expected to be held in the Chinese currency
RMB’s share of foreign currency reserve assets on the rise
Source: IMF latest data available as of June 2021. Investment involves risks. Past performance is not indicative of future performance. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. HSBC accepts no liability for any failure to meet such forecasts, projections or targets. For illustrative purposes only.
China bonds: a diversifier for all seasons
Hear more from Elizabeth Allen, Head of Asian Fixed Income
The value of investments and any income from them can go down as well as up and investors may not get back the amount originally invested. Past performance is not a reliable indicator of future performance. Any views and opinions expressed are subject to change without notice. Any forecast, projection or target where provided is indicative only and is not guaranteed in any way. We accept no liability for any failure to meet such forecast, projection or target. This page is prepared for general information purposes only and does not have any regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive it. Any views and opinions expressed are subject to change without notice. This document does not constitute an offering document and should not be construed as a recommendation, an offer to sell or the solicitation of an offer to purchase or subscribe to any investment.
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