Citywire - For Professional Investors

Register to get unlimited access to all of Citywire’s fund manager database. Registration is free and only takes a minute.

How we invest in India, China: Morgan Stanley IM

How we invest in India, China: Morgan Stanley IM

Morgan Stanley Investment Management (IM) is overweight on the Indian bond market, particularly the dollar-denominated corporate bond segment.

Citywire A rated Michael Kushma, CIO for global fixed income said capital controls in the country is making it difficult for foreign investors to invest in the domestic bond market.

‘We have had position in the dollar corporate market, so we actually have an overweight in India in the most of 2017 on the corporate side,’ he told Citywire Asia, adding that the firm is now just taking profits as those bond issuances have become fully valued.

India’s currency growth, for example, has slowed down over the years on the back of non-performing loans in the banking sector.

As such, this October, the Indian government rolled out plans to inject $32 billion into public sector banks over the next two years to help the country get out of its toxic-loan mess.

In China, Morgan Stanley is actively investing in the country’s dollar-denominated corporate bond market, though demand has been domestically led.

Furthermore, it has also been reducing exposure on property and tier-three local government bond issuances, mainly due to risk premium running pretty low.

Similar to India, China’s onshore bond market, too, has been tightly controlled by the government. It has a market capitalisation of around $9 trillion, but overseas investors’ holdings only make up around 2% of the total.

‘Onshore market has been difficult to access until recently that they started the Bond Connect, so we are working towards to add that system. Once it gets easier, we are open-minded and we may get more active [towards this market],’ Kushma explained.

Since 2010, China has launched several programmes to increase foreign participation in the local market, including the creation of various legal structures to allow international fund managers to set up local entities. This year we saw the inclusion of the Bond Connect platform.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.