(Adds launch date, more details on indexes, Citi comments)
SHANGHAI, March 7 Citigroup Inc will
include China's onshore bonds in its emerging markets and
regional indexes starting on Feb. 1 2018, marking another
victory in Beijing's efforts to woo foreign investors to its
bond market and counter capital outflows.
The announcement by Citi Fixed Income Indices came days
after Bloomberg included China bonds in its global indexes
offering, and could prompt other index publishers to follow
Citi said China bonds would be included in its three
government bond indexes – the Emerging Markets Government Bond
Index (EMGBI), Asian Government Bond Index (AGBI) and the Asia
Pacific Government Bond Index (APGBI).
The amount of assets tracking the Citi EMGBI, AGBI and APGBI
are "around a few billion dollars", it said, citing industry
The U.S. bank also unveiled two new government bond indexes
- the WGBI-DM and the WGBI-Extended - adding China to the latter
But it said China would not be added for now to its widely
tracked World Government Bond Index (WGBI), which remains
unchanged with 23 markets.
"WGBI inclusion criteria usually is subject to higher
acceptance thresholds than any of our indices due to its
significance to the market and to clients," said Arom
Pathammavong, Global Head of Citi Fixed Income Indices.
"In the case of China the recent opening of the bond market
is still new and we expect markets participants to require
time," he added.
Industry reports estimate that between $2 trillion and $4
trillion of assets track the WGBI, Citi said.
It also introduced a WGBI-Extended index which would
comprise 26 markets, adding China, South Korea, and Israel to
the WGBI constituents.
"It's a way to avoid forcing people into the China market
and yet gives them an option," said Singapore-based Mirza Baig,
BNP's head of foreign exchange and interest rate strategy,
referring to the decision to keep two sets of indexes - one
excluding and another including China's bond market.
"Investors can get turned off if they are forced by index
providers into newly opened markets which is why they are
sensitive and slow moving."
Citi said that it had been monitoring China's eligibility
since February 2016, when Beijing opened its interbank bond
market to foreign participants, and had now decided to include
China bonds in its indexes after an extensive review.
China has redoubled efforts to lure overseas investors and
bump up bond market inflows after relaxing rules on foreign
Last week, China opened its forex derivative market to
foreign investors, giving them a way to hedge foreign exchange
exposure in the country's bond market.
Encouraging capital inflows is part of efforts by Beijing to
protect the yuan, which fell 6.5 percent against the
dollar last year, and staunch a heavy and prolonged slide in its
foreign exchange reserves.
Authorities in recent months have announced a flurry of
measures that made it harder to move funds offshore.
Some market watchers have argued the moves to tighten
restrictions on outflows could dampen foreign investment in
China, as companies fear they will have trouble repatriating
At the end of 2016, foreigners held about 870 billion yuan
of Chinese bonds, just 1.5 percent of China's 56.3 trillion yuan
($8.16 trillion) interbank bond market.
JPMorgan predicted last May that Chinese government bonds
could receive at least $155 billion of investment flows should
China's market opening lead to their inclusion in various global
(Reporting by Samuel Shen, John Ruwitch and Umesh Desai;
Editing by Kim Coghill and Nick Macfie)