BEIJING, Sept. 7 (Xinhua) -- Foreign institutional investors added for the 21st consecutive month since December 2018 their holdings of Renminbi (RMB)-denominated bonds in August, reported Economic Daily Monday.
They had a total of 2.46 trillion yuan of RMB-denominated bonds under custody by the end of August, an increase of 5.03 percent or 117.83 billion yuan from July, showed data from China Central Depository & Clearing Co., Ltd. (CCDC).
By different accesses, 2,106 foreign institutions entered China's interbank bond market by the end of August via the Bond Connect, a mutual market access scheme allowing investors from Chinese mainland and Hong Kong SAR to invest in each other's interbank bond markets.
Turnover via the Bond Connect in August reached 409.3 billion yuan, with daily turnover averaged 19.5 billion yuan.
Pan Helin, executive dean with digital economy research institute of Zhongnan University of Economics and Law, said growing holdings by foreign institutional investors pointed to an increasingly attractive bond market in China.
Pan attributed their enthusiasm to the easy access to China's bond market provided to foreign investment upon speeding opening-up, relatively high safety of RMB-denominated assets after China's effective epidemic control helped speed up the economic recovery and stabilize RMB exchange rate, and high yield spread between China and foreign bond products as yields of external bond products remained low given the quantitative easing policies churned out worldwide.
Thanks to the historically high bond yield spread between China and the U.S., China's government-backed bonds became more attractive for foreign institutional investors, noted Sun Binbin, chief fixed-income analyst with TF Securities, predicting that the yield spread between China and the U.S. is likely to remain high in the short term and foreign institutions are expected to keep adding their RMB-denominated bond holdings in the following months.
In the future, foreign institutions can enjoy more conveniences in investing in RMB-denominated bond assets. Recently, China's central bank, securities and foreign exchanges regulators issued a circular to invite public opinions on foreign investment in China's bond market.
According to the circular, foreign institutions will not need to apply for investment in China's bond market via their products. For those who have already entered China's interbank bond market, they can directly invest in or enter China's bourse-based bond market via relative linking facilities. What's more, these foreign institutional investors can conduct cash bond transactions and based on their hedging demand, bond lending, bond forward, forward rate agreement, and interest rate swaps transactions.
Compared with the past when part of foreign investors traded cash bonds on China's interbank bond market via their bank agents, the direct transaction mode provided in the above-mentioned circular greatly improved the transaction efficiency and conveniences, said a bond trader with an overseas asset management firm.
By the end of 2019, China's bond market had around 99 trillion yuan of outstanding bonds, with 2.3 trillion yuan of bonds held by foreign institutional investors, showed the 2020 RMB internationalization report released by Chinese central bank recently. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)
A single purchase
