October 9, 2019 / 8:02 AM / a month ago

Foreigners raised China bond holdings in September as yuan steadied

SHANGHAI, October 9 (Reuters) - Foreigners piled into Chinese bonds in September as China’s currency stabilised, official data showed, reflecting resilient flows into the yuan-denominated instruments amid their gradual inclusion in some major global indexes.

Offshore investors bought a net 110.8 billion yuan ($15.52 billion) of Chinese bonds last month, the China Foreign Exchange Trade System (CFETS) said in a post on its official WeChat account late on Tuesday.

That was a jump from net purchases of 69.9 billion yuan in August, when China’s yuan posted its biggest monthly tumble against the U.S. dollar amid trade tensions with the United States and a slowing domestic economy.

The yuan regained its footing in September, rising about 0.1% against the dollar.

CFETS did not give a breakdown of the bond purchases by country. But it said 48% of trading volume came from overseas commercial banks, 19% from overseas central banks and related institutions, and 17% from overseas funds.

Foreign flows into China have been supported by the 20-month phased inclusion of Chinese government and policy-bank bonds in the Bloomberg Barclays Global Aggregate Index, which began in April. JPMorgan said in September that it would add Chinese government bonds to its emerging market local currency bond index from February 2020.

But index provider FTSE Russell subsequently declined to add China to its widely tracked World Government Bond Index (WGBI), citing problems including scant trading activity and long settlement cycles.

At the end of August, foreign investors held onshore Chinese bonds worth a total of 2.03 trillion yuan, according to Reuters’ calculations using data from China Central Depository and Clearing Co. and the Shanghai Clearing House, the country’s interbank market clearing houses.

The clearing houses had not yet released September data on Wednesday afternoon.

$1 = 7.1413 Chinese yuan Reporting by Andrew Galbraith; Editing by Kim Coghill

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