Investors will often build a portion of bonds into their portfolio to offset uncertain economic, political or global times, such as now, where safe investments are a key part of a well-balanced portfolio. Today, global changes take place at a rapid pace; this includes Beijing’s further opening of China’s capital markets to foreign investors, thereby expanding choice – an attractive feature in the era of Brexit, the US-China trade war and concerns about the global economy.
Given that China is likely to have a lower correlation to other markets due to a centrally run economic model, investors are presented with an interesting diversification benefit to ponder.
Some investors expect China to continue opening up the market as Chinese onshore bonds are incorporated into global bond indices, leading to demand from international investors. The added motive for Beijing is to help local companies access foreign capital. Meanwhile, foreign investors are likely to take a thematic approach and go into spaces based on index inclusion, as this process takes time.
Elsewhere in Asia, managers are considering how they can build portfolios or exposures across illiquid and liquid markets with sufficient protection for periods of sustained volatility for their clients.
Romil Patel, Editor, Funds Global Asia
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