The internationalization of the Chinese currency is expected to boost foreign investments in the country’s bond market, and some investors have started putting up China-focused bond funds this early.
One of them is Edmung Ng, who used to head the investment division of Hong Kong’s de-facto central bank, the Hong Kong Monetary Authority, according to Bloomberg.
Ng’s Eastfort Asset Management is waiting for the approval of Hong Kong watchdog Securities and Futures Commission for its operations.
The firm is now eyeing Chinese bond funds that will invest in domestic and internationally traded debts. The funds will be offered to institutional investors, the report said.
China has taken a number of steps to make the yuan fully-convertible as part of its bid to have the currency included in the International Monetary Fund’s currency reserves by the end of this year. It recently adopted the IMF’s accounting method for computing the country’s balance of payments. It has also opened up its capital market to foreign investors through the Shanghai-Hong Kong Stock Connect and other programs. The government has also launched yuan offshore centers in different countries overseas to facility transactions using the local currency.
These developments are expected to encourage different types of issuers to offer a variety of debt products in China.
“Since the credit differentiation process has started and will continue in the next two to three years, there will be many opportunities for investors and fund managers,” Bloomberg quoted Ng as saying.
Standard Chartered Bank forecast that foreign net purchases of Chinese bonds and equities could reach 500 billion to 700 billion yuan ($80.64 billion-116.67 billion) this year. The bank said there is 60% chance that the IMF will approve the yuan’s inclusion in its basket of currency, now composed of the dollar, euro, pound sterling and the yen.
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