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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    Investors turn to bonds after China's market plunge

    Lobo
    Lobo
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    Join date : 2013-01-12

    Investors turn to bonds after China's market plunge Empty Investors turn to bonds after China's market plunge

    Post by Lobo Fri 18 Sep 2015, 2:20 pm

    Investors turn to bonds after China's market plunge


    • Staff Reporter
    • 2015-09-18
    • 09:19 (GMT+8)

    Investors turn to bonds after China's market plunge C910N0059H_2015資料照片_N71_copy1
    A trading center in Taiyuan, Shanxi province, Sept. 10. (File photo/CNS)
    China's bond markets are expected to see rapid growth in the next six months after investors pulled funds out of the turbulent stock market for better returns, according to Beijing's Economic Observer.
    Following the stock sell-off in June, investors began to move their funds into fixed-income assets, and China's devaluation of its currency in August accelerated the situation, the paper said.
    China's relaxed rules on corporate bond issuance boosted the total issuance between May and August to 240 billion yuan (US$37.7 billion), and it is estimated that over 1 trillion yuan (US$157 billion) of bonds await approval for issuance, the report added.
    The relaxed rules unveiled in January allow non-listed companies to issue bonds and bonds to be sold privately.
    The exchange-traded bonds are preferred by investors, because of the easy access to liquidity and the efficiency of the exchanges in making pledged repurchases. This has led to low coupon rates, the paper said.
    The Economic Observer said interest rates of most bonds issued by property developers in the past two months are 600 basis points lower than the borrowing rates in offshore markets, while rates of bonds issued by companies with an AA+ rating are 100 basis points lower than midterm notes in the intrabank market.
    The bond market also offers the cheapest funds in financial markets in China, and the percentage of funds raised through corporate and municipal bonds in the country's overall borrowing doubled to 24% between January and July from last year, the paper said.
    The expansion of the bond market and the lower interest rates reflect the ample liquidity in the market, the report said.
    Interest rates on average loans have dropped 80 basis points from last year, and those on notes fell 150 basis points, while mortgage rates are 140 basis points lower, the newspaper noted.
    The newspaper said the situation of the rally being built on leverage, which China witnessed in the stock market during the first half of this year, is expected to hit the bond market during the second half, and noted that such an investment approach reduces the risk premium for investors.
    Although China's effort to drive down borrowing costs is for a good cause, the newspaper said such a campaign is risky when the country is in a debt-reduction cycle that started in 2014. The excessive liquidity in the market can cause credit risk to be underestimated and lead to huge systematic problems, the paper added.
    The government should instead encourage the market and financial institutions to inject funds into industries that have a promising outlook or a competitive edge, the Economic Observer said.

    http://www.wantchinatimes.com/news-subclass-cnt.aspx?id=20150918000003&cid=1102

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