Image: Reuters Berita 24 English - In May, foreign investors dropped their holdings of Chinese bonds for the fourth month in a row, at the ...
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| Image: Reuters |
Berita 24 English - In May, foreign investors dropped their holdings of Chinese bonds for the fourth month in a row, at the quickest pace in nearly five years, as contrasting monetary policies kept Chinese yields pegged below those of their American counterparts.
According to Reuters calculations based on data from depository institutions China Central Depository & Clearing Co and the Shanghai Clearing House, foreign holdings of yuan bonds traded on China's interbank bond market were 3.66 trillion yuan ($546.54 billion) at the end of May.
This was the greatest monthly drop since January 2017, dropping 2.9 percent from the previous month. According to data from the People's Bank of China, it was also down 0.5 percent from the end of May 2021, the first year-on-year drop since 2016. (PBOC).
At the end of May, offshore investors held 2.38 trillion yuan in Chinese government bonds, down 0.6 percent from a month earlier. Quasi-sovereign policy bank bond holdings fell even quicker, falling 7.7% month on month and 11.7 percent year on year to 889.9 billion yuan.
"Due to the desynchronized monetary policy between the United States and China, international investors have continued to dump Chinese assets," said Gary Ng, Asia Pacific senior economist at Natixis in Hong Kong.
"Capital outflows from Chinese bonds may continue to be driven by the global monetary tide turning."
The Federal Reserve of the United States raised interest rates for the first time since 1994 on Wednesday, raising the target federal funds rate by three-quarters of a percentage point and projecting more increases as it tries to contain rising inflation.
Investors in China, on the other hand, continue to expect greater policy support as the government attempts to pull the economy out of a deep COVID-induced depression. Concerns over capital outflows have limited China's capacity to loosen policy, according to analysts.
Chinese 10-year government bonds yielded 51 basis points less than their US counterparts on Thursday, down from a 115 basis point premium in early March, reflecting the disparity.
Investors wanting China exposure are likely to choose its government debt, according to Ng. The speedier selloff in policy bank bonds reflects greater risk aversion, he said.
(1 US dollar = 6.6967 Chinese yuan)
