Fixed Income Investors' Forum on China
New York, NY
May 28, 2020
IMN's 1st Annual Fixed Income Investors’ Forum on China will take place in May 28, 2020 in New York City. As China seeks to open up its financial market to a more global investor base, this event is intended to educate Western investors about opportunities in the rapidly expanding domestic Chinese fixed income market. This includes corporate bonds, indices, and especially ABS (which topped over $250billion in total issuance in 2018).
This program will cover the various fixed income investment opportunities in China, and will delve deeper into the unique features and key risks foreign investors should consider. The ABS market will also be addressed in detail, including an overview of asset types (auto, consumer loans, NPLs, SME loans, factoring receivables), deal structures, the difference in the exchange versus the interbank market and regulatory developments specific to the securitization marketplace.
Attendees will hear from China’s debt issuers, international bankers and legal experts with deep experience and knowledge of both the Chinese and western ABS markets, with the aim of discussing how to align foreign investor interest with China’s ambition for a more open bond market.
8:30 AM Pre-Conference Primer: Chinese Regulation 101, Demystifying The Governance Of Chinese Financial Markets
Overview of the respective roles and relationships between of the PBOC, NAFMII, China Banking and Insurance Regulatory Commission and China Securities Regulatory Commission in governing the fixed income market
9:00 AM Opening Remarks, China Finance Association and IMN
Henry Mo, Chief Economist; President (AIG; Chinese Finance Association)
9:10 AM Keynote Speech Cracking the Code: How Can we Effectively Measure Chinese Economic Growth and Political Risk?
How are investors and analysts independently measuring economic growth? What are the metrics being measured?
Slowing GDP growth: cause for concern or reasonably sustainable?
The rise of Consumption and the ‘new economy’ led growth: consumer finance trends including auto finance, online lending, retail
High government debt levels tied to infrastructure and construction projects;
How stable is China’s financial system? Plans re: de-leveraging the financial sector and the real economy
Impact of trade wars; how can political risk effectively be quantified?
9:40 AM Keynote Speaker: Understanding the Nuances of Chinese Monetary Policy
Compare and contrast with US Monetary policy, i.e. quantitative versus rate targeted system
Overview of the structure and execution of monetary policy by the PBOC and SAFE
A Who’s who of Chinese Financial Policy: who is ultimately in charge? The key regulatory bodies and key dates to watch for major policy developments
Monetary policy conduct and the credit system: social/ aggregate financing and M2 (money supply measure)
What are the main tools in the monetary war chest? i.e. 1y deposit, 1y lending, RRR, 7 Day repo rate, 3mo shibor, USDCNY fix and what is their impact on China government bond yield? What are the various scenarios in which each tool may be deployed and what is its impact on bond yield?
10:20 AM What to Buy? Dim Sum and Then Some, An Overview of What’s on the Fixed Income Investment Menu
What is the size and potential for growth of the world’s 3rd largest fixed income market; USD$9.3 trillion and expected to double in next ten years
The China Interbank Bond Market (CIBM)
Asset types: Chinese treasury bonds, provincial and local government bonds; central bank paper; corporate credit bonds; State Owned Enterprises; policy banks ( China Development Bank, Export Import Bank of China); commercial paper, Asset Backed Securities
Potential for additional foreign investment given infrastructure financing needs (Belt and Road) and ability for Chinese corporate borrowers to raise capital in any foreign currency with no RMB repatriation limits
Foreign friendly Dim Sum Bonds: issued in Hong Kong by Chinese Banks and some overseas entities, denominated in Yuan
Which major indices now include Chinese on shore debt and government bonds? Citi, JPM, Bloomberg
11:00 AM Refreshment Break
11:20 AM Key Considerations for the Foreign Bond Investor: The Researchers’ and Traders’ Roundtable
Why include China in the global investment portfolio?
Inclusion in global emerging market and government bond indices: will this become the norm and what does this mean for global investors? Do we need China in our benchmarks?
Bond Trading Challenges:
Logistics: navigating the time zones. Is a local partner required to execute trades? How much control should you be willing to give up?
Liquidity: how are traders managing the liquidity risk, especially for off the run bonds?
How will local bond holders respond in a short-term repo collapse and liquidity squeeze? How liquid is the secondary market in the absence of a centralized market maker?
Duration Risk: How easy is it to employ bond futures, or interest rate SWAPS as a hedging tool?
Inflation Risk: Profiling the current local bank holder of bonds. How interest rate and inflation risk sensitive are they? How can this impact the foreign investor?
Term premiums: how can this effectively be measured? Is there a historical curve used for reference?
Credit analysis: what should investors be prepared to do?
What are the main obstacles for global investors?
Access to the market: remaining regulatory barriers and required schemes investors must meet
Pricing risk accurately: are current levels of disclosure and transparency sufficient in order for offshore investors to evaluate risk and return effectively?
12:10 PM Delegate Luncheon
Track A1:20 PM How to Access the CIBM: Understanding the Main Pathways for Foreign Investors
Compare and contrast the advantages of investing in the CIBM versus the stock exchange market; specifically in regards to diversity of assets, overall size, and liquidity
Role of Tradeweb and Bond Connect
Tradeweb provides fully electronic access for price discovery, settlement and transparency in the CIBM via Bond Connect
Bond Connect provides mutual access between Hong Kong and mainland China’s financial infrastructure with repsect to trading, custody and settlement
Comparing the advantages of Bond Connect to the alternative pathways: QFII and RQFII Programs; how Bond Connect has lowered barriers to entry for overseas investors
Track B1:20 PM FX and Rates Considerations
Rates: what is the impact of a depreciating yuan on global investor appetite for onshore debt?
What investor protections are in place?
How easy is it to move money in and out of China?
Track A2:10 PM Ratings Developments for Chinese Debt
What is involved in rating a Chinese issuer: Do local and international CRA methodology differ?
What issues are international agencies encountering?
Is there too much dependency on local CRAs? Can international investors put stock in these ratings? Are local CRAs too lenient (95% of corporate bonds are rated AA or higher)?
As international CRAs obtain onshore licenses, will more corporates seek international ratings?
Understanding credit analysis specific to SOEs: understanding of government policy priorities and support for certain SOEs, i.e. an implicit government guarantees
Track B2:10 PM Public versus Private Markets in China
What are the major private equity and real estate developments in China
Where are US private equity firms investing?
3:00 PM Refreshment Break
Track A3:20 PM The Flavor of the Month: Finding Relative Value in China’s Bond Market
Compare and contrast the various bond investment options: Green Bonds, Corporate Bonds, and ABS
Who are the major Chinese corporate issuers in local currency and USD$
What are the big industries represented?
How do policy banks, SOEs and corporates interact?
Track B3:20 PM Overview of the Chinese ABS Market
Defining the interbank vs. exchange market and the regulatory landscape; defining asset backed notes and their inclusion in the interbank scheme
Respective roles and relationships between of the PBOC, NAFMII, China Banking and Insurnace Regulatory Commission and China Securities Regulatory Commission in governing the ABS market
Overview of relevant regulatory bodies applicable for individual asset classes and / or securitization regimes
Asset types and deal structures: Autos, Consumer loans, Corporate SME loans, trade receivables, factoring/leasing receivables
Emerging assets including CMBS and REITs
4:10 PM The New York Fixed Income Investors’ Forum on China Concludes