Finding new opportunities in Chinese bonds

Over the past year, driven by improved market access and China’s inclusion in global bond indices, the prospects of China’s fixed-income investments continued to fuel foreign interests. Despite these developments, foreign investors face significant hurdles when they are considering increasing allocations or investing in Chinese bonds, the world’s second-largest bond market after the US.

The reason is two-fold, investors lack the expertise to access and analyze data on Chinese issuers, while Chinese asset managers keen on tapping foreign investors often lack globally-recognized benchmarks and tools necessary to attract offshore capital.

To reconcile the need for Chinese expertise and expectations of global investors, in October 2018, IHS Markit partnered with ChinaBond Pricing Center (CBPC) to launch iBoxx ChinaBond indices (press release). The indices were first international, independent fixed income benchmarks using CBPC pricing data that is widely recognized as the gold standard in Chinese domestic bond valuations.

CBPC, a subsidiary of China’s Central Depository & Clearing, has more than 1,200 institutions using its ChinaBond Pricing Data Products, represents over 90% market share in China.

The partnership combines IHS Markit’s internationally recognized indices and methodologies with CBPC’s pricing data and domestic market expertise. It provides a platform for foreign investors to analyze and understand the Chinese bond market within the familiar iBoxx framework from IHS Markit while gaining access to CBPC’s underlying valuations.

The Hong Kong unit of a leading Chinese asset management firm launched two index funds tracking the iBoxx ChinaBond Agricultural Development Bank Investment Grade indices in May 2019. This decision was based on the combination of trusted ChinaBond valuations for individual bonds and the international branding of indexes. The familiarity that international investors have with iBoxx also helps the funds attract foreign investors who may be reluctant to invest in funds tracking local indices.

Driven by the success of the partnership with ChinaBond and the innovation and quality behind the new indices, IHS Markit received two top honors at The Asset's Triple A Private Banking, Wealth Management and Investment Awards:

• Best Index Provider for Fixed Income
• Editors’ Triple Star – iBoxx ChinaBond Government & Policy Banks Bond Indices

The recognition is a testament to our commitment in bringing unique expertise to the design, administration and independent pricing of indices to clients across financial markets. It also reinforces that our product innovations, strategies, and business directions are addressing the growing needs for objective and independent indices in fixed income and China bond investments.

We are delighted that the Indices team in APAC has been recognized for their excellence by The Asset. In reviewing the industry recognition, we thank our clients’ support and colleagues for their valuable efforts. We look forward to building upon our successes to deepen our offerings in Chinese domestic bond indices and continuously delivering superior value to the market.

S&P Global provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.