China bonds little changed as foreign interest wanes

PBoC restraint also weighing on investors as analysts question how sustainable recovery will be 

China bonds little changed as foreign interest wanes
The ATF China Bond 50 Index climbed 0.01%.

(ATF) China’s corporate and municipal bonds were little changed Tuesday as foreign demand for Chinese securities ebbed.

The benchmark ATF China Bond 50 gauge climbed a pallid 0.01%, essentially unchanged, after a six-day run of gains that had been propelled by optimism of further growth in China.

The ALLINDEX sub-indexes were mixed, with the Enterprise and Local Government gauges also up 0.01%, Corporates down 0.01% and Financials unchanged.   

FOREX COMMENT: Yuan caught in global stock markets' downdraft

Investors have been reluctant to pile into Chinese assets while the People’s Bank of China (PBoC) remains doggedly resilient to hopes for more monetary loosening for fear doing so will overstimulate the nation’s fragile recovery. 

The benchmark has been declining since early in the year, first as the punishing economic effects of the coronavirus epidemic weighed on all Chinese assets and later as the central bank halted stimulus measures. The gauge rallied briefly in the summer as a multi-trillion yuan series of bonds sales targeted at rebuilding downturn-hit industries raised hopes that China’s private and state-owned businesses would win contracts to carry out the work.

China is the only major economy to have grown since the coronavirus downturn but the sustainability of that expansion has led to PBoC restraint on furthering stimulus measures. Analysts also question how long it can last.

“The recovery has been credit-fuelled and investment-led and will ultimately exacerbate the structural problems at the heart of China’s economy,” warned Capital Economics group chief economist Neil Shearing.