This week, the value of the yuan against the US dollar suddenly sharply**, and the offshore market fell by 360 points against the US dollar. This has aroused people's attention and wonders, why is the renminbi in the first place suddenly falling so much?Some even believe that foreign capital is fleeing the Chinese market. However, the data shows that foreign investors are aggressively surging Chinese bonds. What is the reason behind this?
First of all, we need to realize that this time the renminbi ** is nothing, because the yuan has recently experienced three consecutive weeks of large**, rising as much as 1,961 points. From this point of view, the 360 point is just a normal adjustment in the process. In addition, the reverse operation of foreign capital has also attracted attention. According to normal logic, the US dollar's interest rate hike policy should attract foreign funds to the US market. However, on the contrary, more and more foreign investors, including central banks and investment institutions, have sold US bonds. In particular, it is worth mentioning that China, Britain and Japan simultaneously sold US bonds in September this year, with a cumulative amount of up to $89 billion. Overall, the total size of U.S. bonds held by overseas investors fell by $101.6 billion in September from the previous month. This shows that foreign investors' confidence in US bonds has been seriously weakened.
Why are foreign investors selling US bonds and buying Chinese bonds in a big way?What is the reason behind this?
On the one hand, one of the main reasons for foreign investors to buy Chinese bonds is that Chinese bonds are more secure. As the uncertainty facing the global economy increases, Chinese bonds are more attractive than other investment products. Foreign investors believe that China's economy is resilient enough to cope with various risks, so they are more inclined to invest their money in the relatively safe Chinese bond market. According to the recent data released by the central bank, overseas institutions have been ** Chinese bonds for nearly 9 months, with a cumulative amount of nearly 1,000 billion yuan. Especially in recent months, the amount of overseas institutions has increased significantly, with 40 billion yuan in October and 250 billion yuan in November. This indicates that foreign interest in China's bond market is growing.
On the other hand, the income from the purchase of bonds is also one of the factors considered by foreign investors. The interest rate on Chinese bonds is relatively high, which brings better investment returns to foreign investors. In addition, the development of China's bond market has also increased the choice of foreign capital. At present, the number of foreign institutions that have entered China's bond market has reached 1,110, with an average of more than 100 new institutions added each year in the past few years. From the beginning of 2018 to the present, the total amount of Chinese bonds held by foreign institutions has increased by 200% to 33 trillion yuan.
Why would anyone think that foreign capital is flowing out of the Chinese market?This is because those who follow northbound outflows ignore the performance of the bond market. Northbound funds refer to the funds invested by foreign investors in China**, and the outflow of northbound funds has indeed existed in recent months, but the amount is relatively small. In September and October, the net outflow of northbound funds exceeded 60 billion yuan, and it was still a net outflow in November, but only 1.8 billion yuan. In contrast, foreign-funded** Chinese bonds have reached nearly RMB1,000 billion in the past nine months. Therefore, the amount of northbound funds is relatively small, which is difficult to represent the overall attitude of foreign institutions.
Combined with the current situation of large renminbi and sustained foreign investment, we have reason to believe that Chinese bonds are still one of the important choices for foreign investors. Despite the uncertainty in the current international economic environment, China's economic stability and China's support policies for foreign investment will continue to attract foreign capital inflows. At the same time, the development of China's bond market will also provide more investment opportunities for foreign investors.
In short, the 360-point plunge in the renminbi and the phenomenon of large-scale foreign bonds in China are interrelated, indicating that foreign confidence in China's bond market is increasing. The relative safety and high yield of China's bond market will continue to attract foreign investment. As far as China's economy is concerned, the continuous inflow of foreign capital will further promote the healthy development of the financial market and provide stable financial support for economic growth.