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Markets · Bond
JPMorgan’s bond index to include Chinese govt debt, estimates USD 3 bln monthly inflows
2019/09/05 09:15:01
JPMorgan, GBI-EM Index, bond, WGBI,  FTSE Russel

Sep 05, 2019 (China Knowledge) - JPMorgan Chase will begin to phase in the inclusion of Chinese government debt into its Government Bond Index-Emerging Markets (GBI-EM) indices from 28 Feb next year and the weight cap will be set at 10%. Analysts of Goldman Sachs Group, previously estimated that the inclusion could bring about monthly inflows worth of about USD 3 bln into China’s bond market.

The GBI-EM Index is tracked by about USD 202 bln of assets. JPMorgan plans to take 10 months to include the Chinese government debt and add 1% each month.

In recent months foreign holdings of Chinese bonds have grown steadily, marking a ninth consecutive increase since last Dec. The growing momentum is credited to cases such as JPMorgan’s inclusion of Chinese government bonds.

Previously, the index provider Bloomberg Barclays started incorporating Chinese bonds into its global benchmark in April. On top of that, FTSE Russel is also considering to add Chinese government bonds into its World Government Bond Index (WGBI). Goldman analysts Danny Suwanapruti and Menglu Cai expect such a move would attract an additional USD 6 bln to USD 7.5 bln a month inflows from overseas to the world’s second-largest bond market.

Despite a decline of the Renminbi in recent weeks, overseas investors still bought USD 3.5 bln of onshore Chinese bonds last month, according to Chinabond data. Market experts believe the capital inflows into the onshore bond market will speed up as more passive bonds keeps buying the Chinese debt. Moreover, China’s newly launched Bond Connect helps to ease foreign investors’ concerns over access to China’s market as the mechanism allows investors to buy into domestic Chinese debt via Hong Kong.

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