Bloomberg Unleashes 'Kungfu' on Chinese Dollar Bond Market

The toolkit aims to bring visibility and accessibility to the offshore Chinese dollar bond market. It includes new benchmark yield curves, real-time news on China’s debt capital market and the Bloomberg Barclays Emerging Market (EM) USD Aggregate China index.

Ee Chuan Ng, head of Greater China at Bloomberg, tells WatersTechnology that the Chinese dollar credit market has grown rapidly in recent years. “We wanted to make sure that Bloomberg terminal subscribers had access to key data, news and analytics they need when they enter a market,” he says.

Previously, he says information on the Chinese dollar bonds market has been scattered: “We wanted to introduce transparency to this market. As we do, we go into markets and bring price transparency so we’ve been building this up for quite a while. We now have the largest dealers in this space that are using Bloomberg. They are sending executable prices to Bloomberg. A user today who wants to invest in a Kungfu bond can just go to the ALLQ page and pull up a list of dealers pricing this bond for the market. A lot of them are pricing it on an executable basis, so they are willing to trade it electronically,” he says.

The new sector-specific yield curves will provide global investors with real-time analysis of the Kungfu bond market, while the ‘NI CHOFFBOND’ function will give investors access to real-time news on China’s offshore bond market. The index is a component of the Bloomberg Barclays EM USD Aggregate, allowing investors to understand Chinese USD bond analytics and broad market trends in China.

Ng says: “For example, the Kungfu bond toolkit aggregates new issuances in the monitor. Also, whether you’re an analyst or investor, we have a new newswire focusing on this particular market that includes price movements, book building activities, new issuances, and so on. Thirdly, if you are trading in this market, you’d want to find relative value, you need to understand how the price offering of an issuance compares to other similar issues.”

According to Bloomberg data, Chinese dollar bond issuances doubled to $214 billion in 2017, of which $148 billion was issued by Chinese corporations. In a survey conducted by Bloomberg, 80 percent of firms queried said they are already investing in the Chinese dollar bond market and almost 30 percent have an overweight perception of the market in 2018.

In October last year, the Chinese government issued its first sovereign dollar bond since 2004.

Ng says that this is due to Chinese corporates finding it easier to source funding and fund their dollar activities from the dollar bond market. “In many instances, they can also take it back onshore to finance their operations. The flexibility is attractive. It also gives them exposure to a new investor base—be it hedge funds or traditional mutual funds. This is a new source of investors for them and gives them the ability to build a track record with these investors,” he says.

On the other hand, there is interest from global investors too. Ng adds that many investors are looking to pick up yields and this is a “neat way” of gaining exposure to Chinese markets. “It might be the same base currency as their funding and so for the buy side, they are not picking up currency risk, just credit exposure. It’s a better way to manage their risks,” he says.

Ng says Bloomberg will continue to evolve and improve along with the Kungfu bond market. “We are adding tools to the offering in response to client demand. China is the third-largest bond market and I see the Chinese dollar market [as] a component of this,” he adds.