In the interview on CNBC's Street Signs Asia, BlackRock’s head of Asian credit, Neeraj Seth said, "We still see China bond market to be fairly attractive."
Bullish bond thesis: The strong credit data, weak inflation, and liquidity injection from the People's Bank of China make the bonds attractive.
The real and nominal yields with the potential direction of monetary policy support returns in fixed income.
"You have high nominal yield, potential to generate returns in an environment where rates are pretty low globally and a portfolio diversification," said Seth.
China is the second-largest bond market worth $16 trillion. Foreign investor participation in Chinese onshore bonds accounts for just over 2%. As the process of inclusion of Chinese bonds in major global indexes is underway, foreign participation will increase.
With low to no correlation to global markets, China's domestic bonds offer decent returns in an environment where rates are low globally.
Seth commented on the liquidity risk factors with regards to recent China's property developer Evergrand's bond debacle by mentioning that the market is large and it offers a wide array of bonds issued by the government, state-owned enterprises, and private companies.
Investors can build a portfolio that is both resilient and diversified.
BlackRock, on its website, mentions that China's low co-relation to global risk assets is "especially important during times of extreme market volatility" offering up to an 18% annualized growth rate.
Related ETFs: iShares J.P. Morgan USD Emerging Markets Bond ETF (NASDAQ:EMB), Invesco Emerging Markets Sovereign Debt Portfolio ETF (NYSE:PCY), VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (NYSE:EMLC), VanEck Vectors ChinaAMC China Bond ETF (NYSE:CBON) and KraneShares E Fund China Commercial Paper ETF (NYSE:KCNY)