Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

HK Type 4 license through Ballingal Investment Advisors Ltd. ("BIA" or "BIAL")

BACKGROUND
I have 20+yrs experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money. 

4 years in fixed income macro, 8 years running internal hedge fund and 4yrs investment banking at Citi in Japan, 3 years running an Asia multi-strat portfolio at a hedge fund, 4+yrs as an independent special situations analyst.

Pan-Asia Catalysts/Events

Trade Talks/Huawei/ MSCI/Consumption/Zombies

Investing into China's Growing Onshore Bond Market

Quiddity Advisors

Thematic (Sector/Industry)

On 31 January 2019, Bloomberg <a href="https://www.bloomberg.com/company/announcements/bloomberg-confirms-china-inclusion-bloomberg-barclays-global-aggregate-indices/" target="_blank">confirmed</a> that local Chinese RMB bonds would be included in the Bloomberg Barclays Global Aggregate Index (<a href="https://data.bloomberglp.com/professional/sites/10/2017/03/Index-Methodology-2017-03-17-FINAL-FINAL.pdf" target="_blank">methodology</a>) (and the <a href="https://data.bloomberglp.com/indices/sites/2/2016/08/Factsheet-Global-Treasury.pdf" target="_blank">Global Treasury Index</a> and <a href="https://data.bloomberglp.com/professional/sites/10/2016-02-28-Factsheet-EM-Local-Currency-Government-China.pdf" target="_blank">EM Local Currency Government Bond</a> Index), which covers roughly US$54 trillion of outstanding bonds. RMB would become the fourth largest weighted currency in the index after USD, euro, and JPY with a pro-forma 6.03% weighting as measured a week ago against a total basket of elibible securities of roughly US$3.26trln. The inclusion will start in April 2019 and will take 20 months, as described in the original March 2018 <a href="https://www.bloomberg.com/company/announcements/bloomberg-add-china-bloomberg-barclays-global-aggregate-indices/" target="_blank">press release</a>. At that time, there was still work to be done to improve the infrastructure, including implementation of delivery vs. payment settlement, ability to allocate block trades across portfolios, and clarification on tax collection policies. The phase-in period will include a scaling factor of 5% to be implemented incrementally over the 20 months trough December 2020. Bloomberg will create ex-China versions of all three indices starting in April for investors who wish to continue without China exposure in the benchmark. This creates flows. And I like to look at flows.The basic flows are easy enough to calculate. But those flows aren't the only flows to consider. Flows beget flows, and the universe of bonds is not static.Are you prepared for US$30bn a month of foreign inflows by end 2020?

On 31 January 2019, Bloomberg confirmed that local Chinese RMB bonds would be included in the Bloomberg Barclays Global Aggregate Index (methodology) (and the Global Treasury Index and EM Local Currency Government Bond Index), which covers roughly US$54 trillion of outstanding bonds. RMB would become the fourth largest weighted currency in the index after USD, euro, and JPY with a pro-forma 6.03% weighting as measured a week ago against a total basket of elibible securities of roughly US$3.26trln. The inclusion will start in April 2019 and will take 20 months, as described in the original March 2018 press release. At that time, there was still work to be done to improve the infrastructure, including implementation of delivery vs. payment settlement, ability to allocate block trades across portfolios, and clarification on tax collection policies. The phase-in period will include a scaling factor of 5% to be implemented incrementally over the 20 months trough December 2020. Bloomberg will create ex-China versions of all three indices starting in April for investors who wish to continue without China exposure in the benchmark. This creates flows. And I like to look at flows.The basic flows are easy enough to calculate. But those flows aren't the only flows to consider. Flows beget flows, and the universe of bonds is not static.Are you prepared for US$30bn a month of foreign inflows by end 2020?

Big Flows in China Bonds as Bloomberg Barclays Global Aggregate Index Adds