“It’s absolutely critical if you’re a fixed-income investor to have a closer look at the Chinese bond market and then figure out the access as well as the positioning,” Neeraj Seth, head of Asian credit at the asset manager, said at a briefing on Wednesday.
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Foreign investors own only about 3% of China onshore notes, a significantly lower proportion than in other markets. The country’s regulators have been opening the world’s third largest bond market to foreign investors. Trading on China’s new bond link to the rest of the world started this month and the People’s Bank of China opened interbank bond trading to most types of investors last year.
However, the process of raising foreign participation in onshore bonds will be gradual and China’s notes need to be included in major indexes to drive flows, said Seth.