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Investors applauding the launch of Bond Connect

By WU YIYAO in Shanghai | | Updated: 2017-07-03 19:57

International individual investors applauded the launch of Bond Connect, which heralds the next major phase in China's financial market liberalization.

"Over the last year China has been normalizing policy and we've seen the currency stabilize and bond yields start to become more attractive. Bond Connect starts at a good timing point, while the MSCI's decision to include Chinese A shares has prompted heightened expectations – like we've never seen before – and really demonstrates that the world needs to recognize and embrace the Chinese mainland market. It's only a matter of time before we see bonds also included in international indices," said BNP Paribas Head of Global Markets for China, Lai Changgeng.

According to the latest China Central Depository & Clearing data, foreign holdings of Chinese bonds rose for the third straight month to 775 billion yuan in May.

More than 80 international institutional investors were engaged in Bond Connect trading today, showing that international investors are aware of the value of investing in the Chinese mainland, a market with a stabilized currency condition and a momentum for further opening up, Lai said.

David Lynne, Head of Fixed Income & Currencies, Asia Pacific of Deutsche Bank, says the opening of China's domestic bond market, already the world's third largest with an estimated size of more than $10 trillion, significantly expands the asset universe for global investors with renminbi to put to work.

Ivan Chung, Associate Managing Director at Moody's Asia Pacific said rising internationalization of the Chinese onshore bond market, as facilitated by Bond Connect, will equip onshore bonds for inclusion in more global bond indices.

"In the next 12 months, we expect that northbound inflows to the onshore bond market will grow gradually. At the same time, there will be more significant growth in northbound flows as we expect more international bond indices will include or increase allocations in Chinese onshore bonds one year after the implementation of Bond Connect," Chung said.

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