Offshore investors buy $5.9bn in Chinese bonds

Offshore institutions increased their holdings of Chinese bonds for a seventh consecutive month in September, indicating resilient overseas demand for the securities despite a weakening yuan, the South China Morning Post reports. Holdings of all forms of Chinese bonds held by offshore investors and cleared by China Central Depository and Clearing Co rose by 38.7 billion yuan (US$5.88 billion) in the month, to 896 billion yuan, according to calculations based on figures from the clearing house. It was the largest increase in holdings by offshore investors since September 2016, and contrasted with a 1.7 trillion yuan decrease in overall Chinese bond holdings by all investors. “Regulatory tightening forces domestic institutions to deleverage and stock up on cash. Currently, short-term rates are high, so repos are better investments than bonds,” said a Shanghai-based trader. Market observers have pointed to strong gains in the yuan, as well as high yields, to help explain offshore interest in Chinese bonds in recent months.