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Foreign purchases of Chinese onshore bond surge to record 51bn yuan in September

Foreign purchases of onshore China bonds surged in September, highlighting the increased attractiveness of Chinese fixed income amid record-low sovereign bonds yields around the world.

Foreign investors bought 78 billion yuan of government bonds and policy bank bonds in September, up from 53 billion yuan in August, according to data released by China Central Depository Clearing.

Foreign purchases so far this year have reached 174 billion yuan, nearly a fivefold rise compared with 35 billion yuan for the whole of 2015.

In September, foreigners purchases 50.7 billion yuan, the biggest increase in a data stream dating back to 2014, when official record keeping began. Net purchases in September amounted to 41 billion yuan, three times the monthly average this year.

In February China moved to open up its interbank bond market to foreign central banks and mid-to-long-term investors around the world, said Andre de Silva, the head of global Emerging Market rates research at HSBC in Hong Kong, in a note.

Other administrative changes include relaxed rules for foreign exchange repatriation from May, de Silva said .

Chinese bonds have been attractive due to its higher yields compared to record low, or even negative yields in many developed markets. The 10-year yield for central government bonds, or CGBs, is 2.6836 per cent.

We expect foreign inflows to China’s bond markets to remain strong in 2017, HSBC said in the report.

The report also noted that Chinese onshore bonds may be set for inclusion into an emerging market bond index.