J.P. Morgan's flagship indices to include liquid Chinese gov't bonds
J.P. Morgan has decided to include liquid Chinese government bonds into its flagship indices as the country made another step forward in opening up its financial market.
Nine eligible Chinese government bonds, comprising six instruments already issued in the market and new issues expected between October and December this year, will be included in the Government Bond Index-Emerging Markets (GBI-EM) family of indices from February 28, 2020, according to the company.
The inclusion will be phased in over a 10-month period.
In the GBI-EM family of indices, to which around US$226 billion of assets are benchmarked, the GBI-EM Global Diversified index accounts for about 202 billion dollars and a 10-percent weight cap for China will be applied to it.
Gloria Kim, head of the global index research with J.P. Morgan, said China has made significant progress over the past three years in market development, noting that its domestic market is now accessible and tradable for the global investor base.
China launched the Bond Connect program in 2017, which enables overseas investors to invest in the Chinese mainland's interbank bond market using financial institutions of the mainland and Hong Kong.
The country's yuan-denominated bonds were added to the Bloomberg Barclays Global Aggregate Index starting April 1 this year, as the world's third-largest bond market further opens up.
The latest inclusion is "reflective of market demand and replicable for dedicated index managers," said Kim.
"The inclusion represents an important milestone as China continues to liberalize its capital markets and looks to connect more global investors to the country," said Mark Leung, CEO of J.P. Morgan China.