The inclusion of Chinese sovereign bonds in index provider FTSE Russell’s flagship bond index is scheduled to start at the end of the month and will take about three years to be completed.
“This means most asset allocators who track the FTSE index, which is the most popular index tracked globally, will have to allocate to China government bonds,” said Wang Chen, senior executive director, head of product and client strategy at CSOP Asset Management.
Wang was among the panellists speaking at an event held by the Hong Kong Investment Funds Association on the latest developments of the Mainland stock and bond markets last week.
The index inclusion will also see inflows from retail funds, family offices as well as institutional investors.
“We have seen the size of ETFs invested in China government bonds triple in the years before the inclusion. If the institutions are moving into this market, it will also attract retail asset managers’ attention,” Wang said.
Together with the index inclusion, a continued relaxation of cross-border trading schemes should also catalyse foreign investors’ participation in the Chinese securities markets.
“The Hong Kong exchange is currently looking into shortening the holiday time table for the connect channels, and looking into more coverage of the Chinese stocks,” said Patrick Wong, managing director, head of China business development and client management at HSBC Securities Services.
“In the longer run, foreign investors will be treated like local investors,” he added.
The qualified foreign institutional investor scheme, which was launched in 2003, also has been relaxed to match with international investors’ behaviour. For example, overseas clients can do short selling and multi transactions in China, said Wong.
In fixed income, local authorities are looking into extending trading hours to facilitate overseas investors, especially those in Europe, who trade Chinese bonds.