FTSE Russell Inclusion of Chinese Bonds Expected to Attract $700 Billion in Funds


Domestic analysts expect the inclusion of Chinese bonds in FTSE Russell indices to draw at least USD$700 billion in international funds to the market.

Tu Zhensheng  (涂振声) from ICBC’s international research department said to Securities Daily that he expects FTSE Russell to soon include Chinese bonds in its global government bond index, following the cancellation of key restrictions and fund lock-in periods for qualified foreign institution investors (QFII) and renminbi QFII’s (RQFII) this year, as well as new regulations that allow them to engage in exchange rate hedging.

According to Tu these moves in tandem with other efforts to open the bond market over the past several years have essentially removed any major impediments to investment in Chinese bonds by offshore institutional investors, paving the way for their inclusion in benchmark indices.

Yu Chunjiang (俞春江) from Golden Credit Rating International (东方金诚评级) said to Securities Daily that the time and conditions were ripe for the Chinese bond market’s inclusion in international benchmark bond indices, and would be of benefit to further acceptance of the Chinese bond market amongst international investors.

Yu expects the inclusion of Chinese bonds in FTSE Russell indices to attract at least USD$700 billion in funds from international investors to the domestic bond market, giving fresh impetus to liquidity.

Since the start of the year a number of international index providers including FTSE Russell and Bloomberg have unveiled plans to include Chinese bonds in their benchmark indices.

According to Yu these announcements show that international investors can no longer overlook the Chinese bond market given its current status as the world’s third biggest.