The Strategist

S&P Global sees great opportunities in the bond market of China

09/14/2018 - 16:32

S&P Global is interested in the $ 11 trillion bond market in China, which may be good news for international investors who need more reliable bond ratings, CNBC reports.

S&P Global Financial Director Ewout Steenbergen noted that now is the right time to come to China, since the largest economy of Asia lifted restrictions on foreign ownership for credit rating agencies.

Clarifying the company's intention to provide rating services in the bond market, Steenbergen said that S&P Global plans to create a new enterprise for its business in mainland China.

"This is the third-largest domestic bond market in the world, and we think that it will soon overtake Japan, becoming the second-largest domestic bond market," added Stenbergen, who is also executive vice president of S&P Global.

Beijing said that it wants to open its financial sector more for foreign investments by the end of 2018 and allow foreign firms to compete on an equal footing with domestic companies in this sector. Earlier, foreign rating agencies had to work with Chinese partners.

The ratings of leading agencies, such as S&P Global, can attract more international investors to the Chinese bond market. Previously, investors had to rely only on Chinese rating agencies, which were concerned about overly positive assessments.

Steenbergen expressed hope that the arrival of S&P Global in this market can increase the level of confidence.

"To date, 2% of Chinese domestic bonds are bought by international investors, 98% by Chinese investors only and I think we can help the market create... more confidence," he said.

Chinese bonds have recently become more accessible to international investors. At the end of August, a new settlement system was announced for the Bond Connect program, a scheme for investing in bonds linking mainland China to Hong Kong.