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Emerging Markets Fixed Income White paper – China’s Great Opening: This Time it’s real!

Emerging Markets, Global Fixed Income

BNP Paribas Asset Management
 

Introduction

With China now in the process of being included in key global fixed income benchmarks, the opening of the onshore Chinese bond market is finally happening. We think this will trigger the need for investors to make a radical change in  their asset allocation. As this change materialises, it is our belief that inflows to onshore fixed income could dwarf other types of portfolio inflows into China and could become the most significant game changer of fixed income investing of current times. We also believe that, on the external debt side, the dominance of Chinese debt denominated in US dollar is unstoppable.

In the attached document, we discuss the developments that have led to this point that make us believe that the Chinese onshore markets will become a dominant source of alpha for active investors. We will also look at the Chinese offshore fixed income market, discussing in more details why we find both Chinese high yield and  some investment grade corporates to be fundamentally mispriced and why in depth fundamental research will continue to provide some great alpha opportunities to investors.

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