Foreign asset managers are preparing to increase their exposure to bonds denominated in yuan, at a time when it seems likely that the International Monetary Fund (IMF) approved this month the inclusion of the Chinese currency in the basket of currencies.
The IMF's decision to add the currency, also known as renminbi (RMB) to your shopping reserves 280,000 million, boost central banks to follow suit and fund managers say they also make similar adjustments to their portfolios.
IMF support raises the profile of the RMB as an international reserve currency. We believe that many investors begin to perform official assignments to RMB assets, "said AXA Investment Managers in a report.
Analysts expect the yuan would give the IMF an initial weighting of around 14 percent in the basket, which is known by the official title of Special Drawing Rights (SDRs), which would lead to about 40,000 million dollars direct inputs in the coming years. "Most of the central banks we have talked support inclusion and are preparing for it.
Several central banks are considering their first assignment and some plan to increase their existing assignments, "said Jukka Pihlman, global head of sovereign funds and central banks Standard Chartered.
But the holdings of central banks could be the tip of the iceberg. "This will cause a large amount of foreign exchange reserve managers perform an adjustment," said Stephen Chang, head of Asian fixed income at JP Morgan Asset Management . "Global investors are certainly underinvested in Chinese bonds, and we just started from almost zero," he added.