Blackrock says ‘absolutely critical’ to look at China

HONG KONG • BlackRock Inc, the world’s largest money manager, said that investors cannot ignore China’s onshore bond market, which has reached the US$10 trillion (RM42.85 trillion) mark.

“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 yesterday.

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 thirdlargest 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. Inclusion in the major indexes will likely be in a 12 to 18 month horizon, he said.

BlackRock is long on the Chinese yuan, which has advanced 2.8% against the dollar this year. The firm is also long on the Indonesian rupiah and the Indian rupee. Within the Chinese onshore bond market, the firm likes higher-quality government bonds and policy banks as well as quasi sovereign names but is cautious on selective credits based on valuations, Seth said. — Bloomberg