JPMorgan China CEO Sees $300B Inflow into China Bonds on Index Inclusion

Activity in China’s manufacturing sector saw an uptick during the month of March, helping to ease fears of a global economic slowdown and boosted exchange-traded funds (ETFs) like the VanEck Vectors ChinaAMC CSI 300 ETF (NYSEArca: PEK), VanEck Vectors ChinaAMC SME-ChiNext ETF (NYSEArca: CNXT) and the iShares China Large-Cap ETF (NYSEArca: FXI).

Chinese factories showed a marked increase in activity, according to the official purchasing managers index released Sunday. The index rose to a six-month high of 50.5 during the month of March–from 49.2 in February, which bested economists’ forecasts.

While ongoing trade negotiations between the U.S. and China have the capital markets eagerly anticipating a tangible trade deal, stimulus measures by the Chinese government to prop up the domestic economy are starting to take its effect.

A mix of Chinese stimulus measures have been providing the fodder for economic growth, such as lower taxes, no corporate tax breaks, monetary policy adjustments, and more market access for foreign companies to set up shop. All in all, Wall Street is looking at the Chinese government’s latest efforts as a plus for its economy and a boon for China ETFs and bonds.

Chinese bonds made their debut on the Bloomberg Barclays Global Aggregate Index on Monday–a move that would give investors more access to China’s $13 trillion bond market. Markets analysts are expecting that this inclusion would garner a capital influx of $150 billion in foreign inflows.

Over the course of the next 20 months, these Chinese bonds will be added to the global index. Bonds that will be included in the index are the following:

  • Chinese government: 159
  • China Development Bank: 102
  • Agricultural Development Bank of China: 58
  • Export-Import Bank of China: 45

In the video below, Mark Leung, chief executive officer for China at JPMorgan Chase & Co., says the inclusion of Chinese bonds in global indexes could result in inflows of up to $300 billion. He spoke exclusively to Bloomberg’s Tom Mackenzie in Beijing.

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