Offshore investors flood China’s Bond Connect

Offshore investors flood China’s Bond Connect

12/07/17

Paul Nicholson, Corporate Services Manager

Billions of dollars from investors outside China have been flooding the onshore domestic securities markets since the Bond Connect platform opened last week, reports Bloomberg.

In a surge of overseas orders, the Agricultural Development Bank of China saw its 13 billion RMB bond issue 10 times oversubscribed, while China Development Bank Corp sold half of its 20 billion RMB issue to foreign investors. Other beneficiaries of the Bond Connect platform include China Huaneng Group, China Three Gorges Corp., China United Network Communications Corp., Aluminum Corp. of China Ltd. and State Power Investment Corp. All are receiving significant flows of international capital.

Analysts at Standard Chartered Bank estimate that up to 1 trillion RMB could flow into the market by the end of this quarter, with the rising value of the RMB against the dollar attractive to foreign bond buyers.

In a less bullish market assessment, UBS AG Wealth Management estimates that inflows might peak at between $US200bn and $US300bn, with foreign investors focusing on government and financial securities, and the high cost of foreign exchange hedging limiting demand.