Bank of China looks to boost renminbi investment with new bond index

Nov 19th, 2015 | By | Category: Fixed Income

The Bank of China (BOC), one of China’s largest commercial banks, has launched the BOC Renminbi (RMB) Bond Trading Index in an effort to boost international investment in renminbi-denominated fixed income securities. The index can also serve as a reference for tracking assets such as exchange-traded funds, facilitating the growing importance of the Chinese debt market as an asset class for global investors.

Bank of China looks to boost renminbi investment with new bond index

The Bank of China hope the index will serve as a guide for overseas institutional investors.

The index aims to help make the renminbi (RMB) bond market more accessible to foreign investors. BOC chairman Tian Guoli said: “We hope the index will serve as a guide for overseas institutional investors to invest in China Interbank Bond Market (CIBM), an important reference for global central banks and regulatory authorities to understand China’s financial market, as well as a novel contribution to the financial market development and RMB internationalisation.”

According to BOC, renminbi-denominated financial assets held by global investors have seen a steady increase since August 2010, when the People’s Bank of China, the country’s central bank, launched a pilot programme on investment in the CIBM. As of end of July this year, the amount of RMB financial assets held globally had reached 4.34tn yuan ($670bn), of which nearly 20% were held in RMB bonds.

“The bond index will help to improve understanding and promote Chinese bonds, and can be seen as complementary to the earlier move in July by the PBOC to liberalise the domestic interbank bond markets to overseas investors. It is a step towards opening up China’s capital markets as the country seeks to promote RMB as a reserve currency,” said IG Markets analyst Bernard Aw. “The RMB Bond Trading Index should help improve liquidity in the Chinese bond markets as it helps to generate interest in Chinese bonds among bond index fund managers. These managers may be keen to the idea of investing in Chinese debt, which may also provide diversification benefits.”

The move joins a series of programmes designed to promote access to renminbi-denominated securities, such as the RQFII and QFII schemes. Most recently this has included the announcement of the launch of the China Europe International Exchange (CEINEX) which aims to promote greater availability of Chinese financial instruments, including exchange-traded funds, to European investors.

Launched concurrently in Shanghai, Singapore and London, the index will be run by the bank’s Shanghai RMB trading unit. Price information will be maintained every trading day on Bloomberg and Thomson Reuters EIKON platforms.

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