(Yicai Global) Sept. 5 -- J.P. Morgan Chase said it will include Chinese government bonds in its flagship indexes over a 10-month period starting on Feb. 28.
Nine eligible CGBs will be added, including six already in the market and three new issues expected between next month and December, the New York-based investment bank said in a statement yesterday.
The most significant impact from the move relates to the Government Bond Index-Emerging Markets (GBI-EM) family of indexes -- GBI-EM Global Diversified (GBI-EM GD), GBI-EM Global, GBI-EM (Narrow) and GBI-EM (Narrow) Diversified -- which are widely tracked. The GBI-EM GD index accounts for USD202 billion of the USD226 billion benchmarked to the GBI-EM family of indexes and a 10 percent weight cap for China will apply to it.
"The inclusion represents an important milestone as China continues to liberalize its capital markets and looks to connect more global investors to the country," said Mark Leung, chief executive of J.P. Morgan China.
Last month, China's central bank deputy governor, Pan Gongsheng, told Chinese news outlet Caixin that the People's Bank of China will open the country's bond market together with other agencies and enrich its financial instruments and trading mechanisms to meet the needs of foreign investors.
Bloomberg included CGBs and policy-bank securities in its Bloomberg Barclays Global Aggregate Index in April, when the value of bonds managed by overseas institutions immediately rose by 1.24 percent per month, a much higher percentage gain than in the previous three months.
At the end of August, overseas institutions held CNY1.7 trillion (USD238 billion) of Chinese debt, a nine-month high, the China Securities Journal reported, citing statistics from the China Securities Depository and Clearing under the China Securities Regulatory Commission.
China is one of the few major economies where risk-free bond yields are still above historic lows, making it attractive to foreign investors, according to experts.
Editor: Ben Armour