Passive aggressive

30 September 2016 By Pete Sweeney Follow @petesweeneypro

Foreign investors are accelerating plans to increase their holdings of Chinese bonds, a poll shows. The prospect of global index inclusion is likely to push up prices, and yields are attractive. But the fundamentals are still scrambled. This is no place to park the pension.

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A survey of Asian debt investors by Deutsche Bank showed respondents plan to increase the allocation of the Chinese yuan in their local-currency bond portfolios from roughly 5 percent to about 13 percent a year from now. The survey did not give absolute amounts.

The yuan will join the International Monetary Fund's Special Drawing Rights (SDR) system, a synthetic reserve currency basket, on Oct. 1. The yuan will have a weighting of 10.9 percent, higher than the Japanese yen or the British pound.

Some analysts have predicted SDR inclusion, alongside eased access to China's "interbank" bond market, could draw more than $400 billion of foreign capital into yuan bonds.

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