Hi I am Tai Hui, Chief Market Strategist, Asia Pacific of J.P. Morgan Asset Management.

Investors around the world in recent years have found it difficult to generate income and diversify their portfolio.

We believe that China fixed income offer some interesting attributes to address some of these challenges.

First, Chinese government and corporate bonds offer higher yields than developed market counterparts. Chinese and Japanese government bonds are both rated A+ by Standard & Poor but 1-year China government bond offers around 2% of yield, compared with negative yields for the equivalent in Japan.

Second, since the US and other developed economies are looking to raise interest rates, which could lead to decline in bond prices, China is loosening monetary policy to achieve their 5.5% growth target for 2022, including reducing reserve requirement and also cutting lending rate. These are much more supportive backdrop for fixed income.

Third, our research shows that China fixed income has low correlation with the global fixed income market. Hence, they often move in independent fashion. This offers diversification benefits when investors are constructing their portfolio. China’s bond market is already the second largest in the world and its importance to the global market is rising with more international investors participating. 

Finally, we also expect the Renminbi exchange rate to remain broadly stable due to China’s sizeable current account surplus, i.e. they are exporting a lot more than importing. And also the ongoing capital inflow into the Chinese financial market.

Overall, we see a strong case for including Chinese fixed income when building our portfolio for both long term structural reasons, as well as looking at some of the current economic and monetary environment.

Hi I am Sean Cunningham, Asia Head of ETFs of J.P. Morgan Asset Management.

It is helpful to understand from Tai about the opportunities of China fixed income market.

Given the continuous headlines that China is getting as a market, and how we are seeing index inclusion evolve to more appropriate concentration levels in line with the size of that market, it’s important to look at China through different lenses.

Firstly, how you track global Fixed Income benchmarks; and then secondly, and really importantly, how a market like China can add alpha to investor portfolios and provide yield opportunities in a global phenomenon of low rates. 

At J.P. Morgan Asset Management, we have been focused on innovation in the China Fixed Income space; seeking unique, future-proofed solutions with a thoughtful view on China Corporate Credit and relatively attractive areas of the market, such as in the ultra-Short Duration space. We have strategically designed well diversified strategies that aim to evolve with the market over time.

In particular, we have employed approaches covering both short- to long- duration when developing our China fixed income ETF strategies; seeking to provide unconventional solutions to current investor challenges, and with expertise from our Fixed Income and Global Liquidity investment teams. 

On one hand, we consider the future state of China inclusion into global indices and partner with a leading index provider to customize a benchmark that tracks the China Aggregate bond market. On the other hand, we add China to existing, well-received range of ultra-short duration ETF strategy globally.

Serving different needs across investment duration, we believe our China fixed income ETF strategies have a significant role to play in investors’ portfolios. 

Thank you very much for joining us today. If you have any question, please reach out to your J.P. Morgan Asset Management client advisor.