Head of Fixed Income, Asia Pacific
Bloomberg Asia Pacific Head of ETF and
Index Sales Strategy
Associate Managing Director,
Moody's Asia Pacific
China Fixed Income Portfolio Manager,
UBS Asset Management
Hayden Briscoe's presentation at GCC on January 8th demonstrated how the inclusion of onshore China bonds will change the outlook for the global fixed income market; and the opportunities that are emerging.
Index inclusion: the time is right
Moving onto the Q&A session, Briscoe asked the panelists about why index inclusion is happening, what benefits it will bring, and whether onshore markets are set up to handle the process.
William Tu explained that 'in 2016 we felt the pace of reforms in China meant the time was right to bring onshore bonds into our indices.'
Tu went on to say that, 'after consulting with clients and market participants, we presented our ideas and proposals to China's regulators and they responded by doing the groundwork for the inclusion process.'
As for the impact of index inclusion, Ivan Chung added 'index inclusion will bring positive changes because the authorities are working hard to adapt to their needs of international investors.'
…the index inclusion process will bring more transparency to onshore markets by forcing issuers to meet the standards required by international investors.
In China we will see a L-shaped recovery in 2019, longer business cycles, and longer-term quality growth.
China in 2019 – the three Ls
Turning to the outlook for China and fixed income markets, Briscoe explained that 2019 looks quite different to previous years and that the outlook will be dominated by what he calls the 'three Ls':
1. An L-shaped recovery: growth is slowing in China as we move into 2019, but policy support will improve the macro outlook for the economy in H2 2019 and stabilize the growth rate. That's different to previous slowdowns, when massive stimulus drove a sharp rebound in growth.