Good day and week Steemit friends,
I gave a speech this morning on: "Why you should invest in China". The subject was mainly concentrated on bonds (Fixed Income).
I thought to share my analysis with you. Let me know if you have any question.
Please note that this is just my opinion, hence you should not consider it as an investment recommendation
Why should you invest in China based bonds denominated in USD?
The main reason is: strong fundamentals!
China has a very strong political system, no opposition and no politicians lies. The enact reforms with ease, and that's my second point for rationale, reforms. The country enacts 30 years forward reforms such as:
- The Belt & Road Initiative
- Strategically transitioning its economy that produces high-value added products (this is quite a huge shift, brace dear European artisans...), and also they are working towards an important improvement in Corporate Governance which will increase transparency and therefore attract more capital from abroad.
Convinced yet?
Hold on. The best is about to come
Not only USD bonds are interesting, but also the once denominated in Yuan.
Why then, should you invest in China based bonds denominated in CNH/CNY (Chinese Yuan)?
The reasons are multiple, structural, cyclical and technical. All stars seem to be aligned here
- Chinese Yuan is becoming a World Reserve Currency, Chinese Yuan bonds are likely going to be included in Worlds Bonds' indexed, both of those structural factors should drive inflows in the country north of 300bn$, according to my estimates.
- Supply of bonds this year should be easily absorbed (techincal)
- Banks liquidity conditions should remain stable, despite their deleveraging, the central bank will soon lower the Reserve Rate Ratio by 200bps!!
I believe that yields on Chinese Yuan bonds are going to fall (prices to increase) see the chart below (that I took from Bloomberg terminal). Yields have risen too much.