Asia Times Financial (ATF) today launched news and index services – notably the Asia Times Financial China Bond 50 Index – to provide expert, fast and accurate narratives about key Asian credit markets.
The ATF China Bond 50 Index is a product created by the collaborative strength of Capital Link International and its partners: media platform ATF and Swiss-based AllIndex, the creator of indices and index technology.
“A lack of comprehensive and credible information, liquid benchmarks and ETFs has meant that the international investor community has had to ignore many higher-yielding Asian market sectors,” said Evan Kalimtgis, vice-chairman and Co-CEO of Capital Link International and a founding board member of Asia Times.
China’s corporate bonds have been acutely under-owned by international investors, he said, noting that in an era of zero and negative yields and high currency concentration risks China provides the deepest source of largely-untapped spread income globally.
“The ATF China Bond 50 Index, as the world’s first liquidity-focused, cross-sector Chinese bond index, will be the comprehensive and credible investable benchmark platform that transforms this situation,” he said.
The ATF China Bond 50 Index has a uniquely designed methodology and aims to create a Chinese debt benchmark that will bring transparency and global tradeability to high-yield Chinese onshore fixed-income markets.
Dr Christian Kronseder, CEO of AllIndex, said: “We have put a lot of effort into creating one of the few investable bond indices by getting in touch with virtually everyone in the Chinese bond market to develop a deep understanding about its structure. This is especially important for a large bond market like China. In the end we arrived at a transparent and effective set of selection rules, combining the most liquid and tradeable onshore bonds in a concise set of index constituents. From our point of view, it adds another piece to the puzzle making the Chinese onshore bond market more liquid.”
The need for a tradeable fixed-income China index has never been more acute with the world’s second-largest economy providing a relative safe harbour to stormy global markets.
"We are living in an era of negative yields,” added Jonathan Hu, CEO at Pengyuan International, China’s premier rating agency and ATF partner.
“Global fixed-income investors are desperate for returns and China’s bond market is looking for investor diversification. The onshore RMB bond market along with Chinese companies and US dollar issuances are not to be missed by investors. Pengyuan International is happy to be a partner of ATF, where we can make our voice heard by global investors. It is time for the market to hear from a prominent Chinese credit rating agency."
Indeed, there are diversification needs on both sides.
Andy Brown, chief investment officer of HakuCapital Global Investment Advisors, a multi-asset global investment manager, said both China and global investors need an internationally recognisable, independent benchmark for facilitating these flows.
“China requires locally supported flagship investible products and the ATF China Bond 50 Index will serve as a tradeable, media-branded flagship index. It can create a benchmark that allows global managers to be ranked by their performance vs the index. It can also participate with credibility in the market, thus making it a tool that the Chinese finance sector can support globally.”
While China’s $13 trillion onshore bond market is the second-biggest in the world, after the US, foreign ownership is currently 2.3%. This is tiny compared with developed markets such as Japan (12.1%) and the US (28%), as well as emerging markets including Indonesia (39%) and Malaysia (24%).
According to Bond Connect data, March saw record total flows in the mainland Chinese bond market of more than 478 billion yuan ($67.4 billion). China has served as a deep market and a safe haven following the coronavirus outbreak as US credit benchmarks suffered greater losses and experienced greater volatility.
'Window of opportunities’
Julien Martin, general manager of Bond Connect, said: “The China bond market undoubtedly remains as the window of opportunities to global investors in 2020 amid the macro risks. The market drew robust investment interest driven by the combination of index inclusion, monetary easing policies, cheaper funding costs and steepening rates curves.
“And given these record flows, we welcome the ATF liquid index as a helpful benchmark for investors as it shows the maturity and investibility of the Chinese bond market”
Mark Jolley, a strategist at CCB International Securities, said: “China’s domestic bond market has its unique characteristics, players and behaviour. The local banks obviously have a significant role in the interbank market while the lifers, fund managers are natural participants. Not anybody can issue a bond and trade in the interbank market. There will be a learning curve for overseas investors. A diversified index is a good starting point for global investors who look for Chinese credit exposure.”
ATF is addressing the need for these incipient flows to have liquid and credible benchmarks, information and products. In contrast, several large index providers further delayed China inclusions, with JP Morgan citing "market volatility" as the reason for not increasing the Chinese weights and expanding asset classes in their index products. The ATF Chinese Bond index fills this void, providing a liquid benchmark across China's key fixed-income sectors supported by senior local partners on the Index Advisory Committee.
The Index committee includes senior specialists from a leading mainland commercial bank, from Saxo Bank, and on-shore rating agency, Pengyuan International. This allows the ATF 50 to focus on the key drivers in the strategically critical, but largely overlooked names in all mainland bond sectors – Corporates, State-Owned Enterprises, Financials, Local Governments and Policy Banks.
The ATF China Bond 50 Index’s constituents are selected according to their liquidity and tradeability as the key sectoral components both on rule-based criteria and with final vetting by a locally knowledgeable and connected advisory board.
Brown said the ATF China Bond 50 Index can be key to China institutionalising and modernising its bond markets as Beijing pushes forward in its ambition of achieving reserve currency status. “It’s mission critical for the Chinese economy and a prime directive for the government but before this can be achieved, the RMB must be fully fungible, so a conduit for capital inflows must be established. The bond market is key to this process,” he said.
“Currently, there is no single institutional gateway to China’s capital markets, and specifically, to its corporate bond market,” Brett McGonegal, a founding board member of Asia Times and Capital Link International Chairman and co-CEO.
“The ATF China Bond 50 Index is unique in that it provides the investable measure of the Chinese onshore fixed-income market,” McGonegal added. “It brings standard Western financial practices – tradeable indices linked to products – to China for the first time. China couldn’t do this until now. But the ATF China Bond 50 Index opens the door for institutional levels of investment volume that can be sent to China’s domestic market – worth in excess of $13 trillion – by global fund managers for the first time.”
Asia Times Financial
Asia Times Financial is the sister publication of Hong Kong-based Asia Times, which has published independent and accurate news, commentary and geopolitical analysis about and from Asia for a global audience since 1995.
China is opening its doors to foreign investors desperate for yield and diversification. ATF is now ready to deliver news, commentary and analyses to these global investors keen on increasing their exposure to the Chinese market.
The index products will initially focus on the mainland Chinese bond markets, with a plan to roll-out a family of tradeable liquid indices, then on India before expanding coverage to the rest of Asia.
“Asia Times Financial will be the premier, Asian-headquartered finance-focused site, bringing local analysis, practitioner perspectives, and a family of unique index instruments tailored for global participation and for understanding of the Chinese and Asian Markets,” said Umesh Desai, executive editor of ATF. “The timing cannot be more opportune given the turmoil in the West, particularly in credit markets, and all eyes are now on the deep but relatively unexplored Chinese bond markets.”
The launch comes at a time when China is accelerating its regulatory efforts to open its fixed income markets as the nation’s massive current account surpluses become a thing of the past and it joins the ranks of mature, internationally investible domestic demand-driven economies. Asia Times Financial is dedicated to bringing the key stories of Chinese and Asian markets in a clear narrative framework to its readership by covering key corporate market events, regulatory and financial sector updates, local credit ratings, investment flows, index movements and top practitioner views.
“Asia Times Financial recognises and fulfils the critical role for the delivery of credible locally sourced financial, regulatory and institutional practitioner participation in the region as necessary for the integration of China and Asian markets to the global mainstream at this critical juncture" concluded Desai.