China’s interbank bond market has seen a sizeable rise in offshore institutional investors since the start of 2019, with an increasing number making use of the Bond Connect initiative.
Data from the China Foreign Exchange Trading Centre (中国外汇交易中心) indicates that as of the end of June 2019 a total of 1961 offshore institution investors had entered the Chinese interbank bond market.
This included 923 who entered the market via the settlement agency model, for an increase of 149 compared to the end of last year, as well as 1038 who used the Bond Connect initiative to participate in the market, for a rise of 535 over the same period.
Offshore institutional investors concluded 2.1 trillion yuan in transactions in the first half of 2019, for a rise of 36% compared to the preceding half and 31% compared to the same period last year, accounting for 2% of all transactions on the spot bond market.
Bond purchases by offshore institutional investors totalled 1.3 trillion yuan while sales were 0.8 trillion yuan, for net purchases of 500 billion yuan.
Offshore institutional investors continue to show a preference for shorter maturities, with 39% of investments in instruments of under one year, 19% for one to three years and 23% for seven to 10 years.