Gongfu bonds become bright spot with Asian investors as Chinese US$ bonds take off

AS GLOBAL investors continue to search for yield, China's dominance in Asia's bond market continues as its growing investor base and new issuances see no signs of abating. In 2017, the Asian G3 bond market experienced an exponential growth of 63 per cent to nearly US$400 billion, after eight years of compound annual growth rates of 35 per cent. China was no doubt a key contributor to this remarkable growth trajectory, accounting for 60 per cent (US$200 billion) of new volumes issued. Seven years ago, new issuance by Chinese players was just US$10 billion.

In the primary market, the dynamic between investors and issuers have also shifted, with the proportion of Chinese participants now accounting for 70-80 per cent of the market, compared to the dominance of European investors in years past.

The growth in issuance volume by China has outrun those of other Asian markets. Market specialists believe that the shift of market dominance to China away from South Korean and South-east Asian markets is likely to continue and is not reversible, given the steady economic growth of China's economy and the increasing offshore funding needs of Chinese corporates.