Last week FTSE Russell affirmed that China will be included in the FTSE World Government Bond Index from October 2021, confirming China’s membership of three major global bond indexes (Exhibit 1 and 7). Below we recap the investment case for an allocation to China government bonds1 and detail why now is an opportune time to gain access.
Source: GSAM, Goldman Sachs Global Investment Research, Barclays, FTSE Russell. Estimated Barclays Figures. As of March 2021. For illustrative purposes only.
The Investment Case
Source: Macrobond, GSAM. As of March 26, 2021.
Source: GSAM, Bloomberg. As of January 29, 2021. Correlations based on weekly returns for the last 5 years. Government bond correlation: 10 -year government bonds Past correlations are not indicative of future correlations, which may vary. Past performance does not guarantee future results, which may vary. For illustrative purposes only. Indexes used: FTSE China Government Bond Index, Bloomberg Barclays Global Aggregate (Hedged), Bloomberg Barclays Global Aggregate Corporate (Hedged), Bloomberg Barclays US Corporate High Yield, JP Morgan GBI-EM Global Diversified Composite, Bloomberg Barclays US Treasury Index, MSCI China A Onshore Index, S&P 500 Index. Diversification does not protect an investor from market risk and does not ensure a profit.
Source: Macrobond, ChinaBond.
*Other investors include all mid/long-term overseas investors approved by PBOC, including commercial banks, insurance, securities companies, asset managers, pension funds, charity funds, endowment funds, trust companies, or investment products issued by the aforementioned institutions, etc. Source: Goldman Sachs Global Investment Research. PBOC, SAFE, CSRC
Source: GSAM. China Foreign Exchange Traded System. As of March 2021.