Chinese renminbi-denominated government and policy bank bonds will join the Bloomberg Barclays Global Aggregate Index in a phased process starting next year.
Inclusion in the index will encourage foreign investors to raise their exposure to China’s onshore bond market. The change, announced by Bloomberg last week, may also help to correct an imbalance that has led global investors to be disproportionately exposed to bonds issued in dollars, yen and euro but not the renminbi.
“To date, China has been largely absent from the portfolios of foreign bond investors, so this is an important step to change that,” said Luc Froehlich, head of investment directing, Asian fixed income at Fidelity International.
Chinese renminbi-denominated bonds remain excluded from other influential indices. Paul Greer, a portfolio manager at Fidelity International, says inclusion of Chinese onshore bonds in the JP Morgan Global Bond Index Emerging Markets suite of indices (GBI-EM) is “probably still some way off”.
“Several key hurdles for inclusion are required for GBI-EM including the country’s GNI [gross national income] per capita, agency credit rating, market liquidity and ease of access for international investors,” he said.
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