Halister News

(Bloomberg) -- Global investors should consider buying bonds of domestic Chinese and Indian markets to boost risk-adjusted returns before investing in both markets becomes more common, according to Geoff Lunt, senior fixed-income product specialist at HSBC Global Asset Management, in a report.

• China and India now account for 0% of GBI-EM, Citi WGBI and “tiny” exposure in Barclays Global Agg index: report
• “Both markets are similar in structure to those more familiar to global investors,” Lunt
  • Sovereign bonds are issued across the yield curve with also spread products in quasi-sovereign, state-backed undertakings and corporate bonds available
  • Liquidity in the sovereign markets is generally good, given the large size and trading volumes
• Lunt points out that both markets “are not well correlated to the global risk appetite which can result in wholesale allocation away from emerging markets during times of stress”
  • “Both have independent and uncorrelated interest rate cycles, which can add to the stability of returns of a global portfolio over time”
• Comparatively higher yields, the potential inclusion of China bond market into global fixed-income indexes, and Indian government’s push for supply side reform are also reasons to increase allocations in these two bond markets: Lunt
  • Sees around $150b of demand for China’s onshore bond market once it gets included into main global indexes