The economy-toppling health crisis of 2020 has only accentuated the nascent charms of Chinese government bonds in the eyes of overseas investors, industry veterans say.
As the year began, inflows had been poised to rise on the back of improving market access, benchmark bond index inclusions and a respite in U.S.-China trade tensions, but momentum kicked into a higher gear as the country's economy led the way globally in fighting through coronavirus-related challenges.
The market context evolved materially this year, in a way that bolstered the case for Chinese government bonds, said Paras Anand, Singapore-based chief investment officer, Asia-Pacific, with Fidelity International. The firm had $611.4 billion in assets under management as of Sept. 30.
In the face of a "substantial test" for China's economy this year, "we've seen currency stability … successful management of the pandemic (and) a return of economic activity," giving investors a greater degree of confidence and supporting arguments in favor of a "meaningful" portfolio response, he added.
Chinese bonds "are getting a lot of positive attention due to how they've been proven to be a diversifier in portfolios through the pandemic," agreed Jean de Kock, Singapore-based fixed-income manager research specialist with Mercer Investment Solutions (Singapore) Pte. Ltd. Yields that look attractive even on a hedged basis are adding to their attraction, he added.
"Without doubt, the pace at which inflows have increased this year is ... faster than what we would have anticipated at the start of the year" — strong, sustained, pretty broad-based, said Prashant Singh, a Singapore-based senior portfolio manager of emerging markets debt with Neuberger Berman Group LLC.