The details of the scheme would appear to be very market-friendly and a clear statement from China as to its willingness to provide the appropriate structures for foreign capital.
Why is CIBM Direct in demand?
China's onshore bond market is now the third largest in the world at around RMB 54 trillion (USD 7.3 trillion). It is not a single bond market however. The Interbank Bond Market, regulated by the PBoC, accounts for about 90% of the total outstanding debts, while the Exchange Bond market under the China Securities Regulatory Commission makes up the remainder.
The expansion of the bond market in China has been significant with 20% annual compounded growth over the last ten years. But it has mainly been a closed market, with only 2% being held by overseas institutions. BNP Paribas expects this to increase to between 5 and 10% over five years. There is likely to be an advantage for first movers, especially when the RMB will be formally included in the Special Drawing Rights (SDR) currency basket of the International Monetary Fund (IMF) in October 2016, hence the wide interest in this untapped new area for gaining China exposure.
It is a dynamic market with huge potential in asset-backed securities, Panda bonds, Green bonds and municipal government bonds all examples of the many emerging opportunities.
Debt Issues
Despite this potential, there is an increased focus on the stability of debt in China and it seems likely that this will be under more scrutiny with this development. The quality of debt seems uncertain, especially given the onshore ratings providing nearly 40% of corporate debt AAA ratings. To date, default rates have been tiny, with only 12 cases since March 2014. But the possibility of this increasing is rising. The defaults that have happened at local or central state-owned enterprises, or SOEs, have particularly surprised investors, and the government's stated intent to tighten up on industries with over-capacity and overleverage means this is likely to rise. While further defaults may cause a degree of concern, it is only healthy for the market's long term development to provide a proper premium for credit risks.
【CHINA OPENS THE DOOR TO GLOBAL INVESTORS】相关文章:
★ 薯片诞生记趣谈
★ 煎蛋小学堂:英语百科(视频+中英字幕) 第21课:你应该畏惧的寄生虫
★ 煎蛋小学堂:英语百科(视频+中英字幕) 第9课:公共马桶的正确使用方法
★ 煎蛋小学堂:英语百科(视频+中英字幕) 第20课:世界上规模最大的实验
最新
2016-11-11
2016-11-10
2016-11-07
2016-11-04
2016-11-03
2016-11-03