The FSA Spy market buzz – 2 June 2023
Buffered funds come out to play, Singapore and Shanghai connect, Franklin’s buying again, under and over estimating technology, US debt ceiling melodrama, Evergrande’s non-payment and much more.
China’s bond market has become a topic of discussion after the announcement that onshore bonds will be included in the Bloomberg Barclays Global Aggregate Index next year.
Gregor Carle, head of Asia-Pacific fixed income product strategy at Blackrock, said that the index inclusion can potentially double foreign participation, with estimated inflows of around $250bn.
He also believes that including onshore Chinese bonds in a portfolio can increase yield and lower volatility.
In China, however, the appetite for fixed income products has turned sour this year. Year-to-date, fixed income products had net inflows of RMB 244.63bn ($35.54bn), but only two out of seven bond fund categories saw positive inflows, according to Morningstar data.
Short-term bond funds were the most popular in the fixed income category, attracting a net of RMB 324.46bn in assets, followed by convertible bond funds, which had net inflows of RMB 1bn.
Other bond fund categories, such as the normal, aggressive and pure bond funds saw a combined net outflow of RMB 70.53bn, Morningstar data shows.
Against this backdrop, FSA asked Niki Wu, Shenzhen-based senior manager research analyst at Morningstar, to look at two onshore China aggressive fixed income funds that are sold through the Hong Kong-China Mutual Recognition of Funds (MRF) scheme: the Bosera Credit Market Fund and the E Fund Stable Value Bond Fund.
|Size||RMB 1.2bn ($170m)||RMB 6.6bn ($960m)|
|Manager||Jun Guo||Zhang Qinghua|
|Three-year annualised return||4.73%||4.21%|
|Three-year annualised alpha (relative to peer group)||1.25%||-1.80%|
Part of the Mark Allen Group.