‘Chinese debt mkt may see $80bn inflows in 2019’

6th December, 2018 10:07:28 printer

BEIJING: China may see about $80 billion of inflows to its debt market next year when yuan-denominated bonds get added to a widely tracked index, according to Morgan Stanley.

Foreign demand, from both active and passive managers, for government bonds should help fund the current account deficit next year and stabilise the yuan, analysts Min Dai and Chun Him Cheung wrote in a note Wednesday. Bloomberg LP earlier this year put China's yuan-denominated bonds on track for a phased-in inclusion in the Bloomberg Barclays Global Aggregate Index in April. The market may see further $140 billion of inflows if two other bond indexes follow suit, the note said, report agencies.

While foreign ownership remains very low, it will over the long term grow to more than $1 trillion from $240 billion currently if the yuan becomes more widely adopted, according to the note. China has been gradually opening up its capital markets to entice inflows, as its current account surplus narrowed and domestic fund outflows picked up amid depreciation in the yuan.