Chinese debt is back in favor with overseas investors – Bloomberg


Early Tuesday in Asia, Bloomberg came out with an analytical piece highlighting the jump in China’s bond-buying by the foreign investors to the all-time high in April. In doing so, the “investors are unfazed by China’s narrowing yield premium,” said the piece.

The report quotes data from ChinaBond while saying,g “After the nation’s bonds suffered their first outflow in two years in March, foreigners added 52 billion yuan ($8.1 billion) to their holdings in April, bringing the total to a record 2.1 trillion yuan.”

“The underlying case for Chinese bonds is still very, very strong. Because of its low correlation to global rates, its high nominal yields and high real yields form a very important part of portfolio construction,” said Pramol Dhawan, head of emerging markets portfolio management at Pacific Investment Management Company LLC, per the report.

It worth mentioning that the foreign investors’ return in April isn’t too lucrative as the report said, “Last month’s inflow was less than half the amount seen in January.”

“Investors still need to look for uncorrelated sources of returns, as negative bond-equity correlations may be challenged during a rapid rise in yield,” said UBS Global Wealth Management’s Strategist Lucy Qiu.

FX implications

The jump in Chinese investments suggests better days ahead for commodities and Antipodeans. The mood could be well observed through the AUD/USD price moves of late.

Read: AUD/USD: Pressured towards 0.7800 amid US dollar bounce, China inflation eyed

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