China's bond market may become 2nd largest in 5 years

UBS Asset Management says the bond market will offer huge growth potential for fund investment

UBS Asset Management expects China's bond market to become the second largest in five years, offering huge growth potential for fund investment.

China is now the third largest bond market globally and its bond market is set to double in size over the next five years to become the second largest, according to a report of UBS Asset Management today.

"We expect the China onshore bond market to be included in global indexes,"  Rene Buehlmann, head of UBS Asset Management Asia Pacific, said, "Assuming institutions allocate around 7 percent to the market, that would result in US$3 to 3.5 trillion inflowing to China."

After A-shares were included in the Emerging Market index of Morgan Stanley Capital International, China has grown in importance. That importance has seen China's share in the MSCI Emerging Market Index rise from 6.6 percent in 2000 to 17.3 percent in 2010 and to 28 percent in June. The report shows the percentage is set to grow to 29.3 percent in 2018, and up to 37.9 percent by 2020.

"China's market is the largest asset pool to be accessed by foreign asset managers. The risk management measures imposed by Chinese regulators will trigger a shift of assets to fund investment," Buehlmann said. "This indicates huge growth potential for fund investment in China."

UBS Asset Management's strategic focus is to expand offshore China investment offerings and aims to build a diversified business for long-term sustainable growth in China, with risk management being their top priority

UBS Asset Management became the first Qualified Domestic Limited Partners license-holder to receive a Private Fund Management license in China in July.


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