Fixed Income Strategies

China Bonds

Aims to provide stable capital appreciation over the medium to long term through exposure to Renminbi (RMB) fixed income investments.

Investment Philosophy

Incepted in 2010, the China Bond strategy aims to provide stable capital appreciation over the medium to long term through exposure to Renminbi (RMB) fixed income investments. The term RMB refers to both onshore RMB ("CNY") and offshore RMB ("CNH"). Nikko AM also collaborates with Rongtong Fund Management, an affiliated joint venture company in China. Rongtong's research team provides recommendations and constructs model portfolios. These research ideas help the Nikko AM Asian Fixed Income team to formulate views about the China bond market.

Our investment process seeks to deliver returns through multiple sources of alpha, utilising both top-down and bottom-up strategies. Our research approach utilises our proprietary Fundamental, Valuation and Technical (FVT) framework to distil the top- down and bottom-up perspectives from a multitude of macro-economic factors and issuer- and issue-specific characteristics, to add value within the defined levels of risks and constraints, using both qualitative and quantitative techniques. Our Internal Credit Rating (ICR) model, which Nikko AM has used since 2006, has been time and stress tested for its robustness.

For more details on our investment philosophy, Research and ESG (Environment, Social, and Governance) framework and investment team, please visit the Asian Fixed Income strategy page.

Leading player in China bond space

Nikko AM has a long-standing experience investing into China. Our track record goes back to 2010 when we launched our first offshore RMB bond product to tap on opportunities in this new and growing market segment. We were further granted our Renminbi Qualified Foreign Institutional Investor (RQFII) quota in 2014 which provided access to the onshore RMB bond market and expanded our investible universe. Through these years, we have developed a few China bond funds with different investment objectives that aim to meet the different needs of the investors.

Abundant opportunities remain as China’s bond market evolves

The Chinese fixed income markets have been gaining traction in recent times, behind China’s phenomenal economic growth and unprecedented technological advancement over the past decade. This impressive evolution of China’s bond market, as it ascends to the world’s second-largest bond market1 , has expanded the scope of investment opportunities for investors—offering attractive yields compared to other developed markets2 , lower correlations to the broader market and greater liquidity. Over the years, consolidated efforts from Chinese regulators have increased accessibility of its onshore bond market to foreign investors. While foreign ownership is growing, it is still below levels seen in other bond markets, indicating a large potential for growth and further inflows.

Inclusion of RMB as a reserve currency

The inclusion of renminbi as the third largest reserve currency in the International Monetary Fund Special Drawing Rights (SDR) basket3 is also helping the case of RMB bonds. Since inclusion, countries have increased their holdings of RMB assets, usually in the form of RMB bonds, as part of their national reserves. With more investors using and holding the currency, the need for an avenue to obtain excess returns over deposit returns has grown.

Major indices continuing their China bond inclusion process

The opening of the China Interbank Bond Market (CIBM) to foreign investors has led to index issuers including China RMB Bonds into traditional global bond indices and global emerging market bond indices. This has resulted in large inflows into the asset class.

1Source: Morningstar (2021).
2Source: International Capital Market Association, National Association of Financial Market Institutional Investors (2021).
3Source: IMF (2021). 08/01/14/51/Special-Drawing-Right-SDR

Important Information

The funds mentioned are Singapore registered funds approved for sale or purchase in Singapore. By proceeding, you are representing and warranting that you are either resident in Singapore or the applicable laws and regulations of your jurisdiction allow you to access the information.

The information on this website is not intended to be an offer, or a solicitation of an offer, to buy or sell any product or service to any person in any jurisdiction where such offer, solicitation, purchase or sale would be unlawful under the laws of such jurisdiction.

This website may contain links to the website of certain overseas affiliates of Nikko Asset Management Asia Limited (“Nikko AM Asia”). However, providing such links should not be considered as offering or solicitation by Nikko AM Asia of any product or service of its affiliates to any person.

This website is purely for informational purposes only with no consideration given to the specific investment objective, financial situation and particular needs of any specific person. It should not be relied upon as financial advice. The mention of individual securities, sectors, regions or countries within this website are for illustration purposes only and does not imply a recommendation to buy or sell. You should seek advice from a financial adviser before making any investment. In the event that you choose not to do so, you should consider whether the investment selected is suitable for you. Investments in funds are not deposits in, obligations of, or guaranteed or insured by Nikko AM Asia.

Past performance or any prediction, projection or forecast is not indicative of future performance. The Funds or any underlying funds may use or invest in financial derivative instruments. The value of units and income from them may fall or rise. Investments in the Funds are subject to investment risks, including the possible loss of principal amount invested. You should read the relevant prospectus (including the risk warnings) and product highlights sheet of the Funds, which are available and may be obtained from appointed distributors of Nikko AM Asia or our website ( before deciding whether to invest in the Funds.

The information contained herein may not be copied, reproduced or redistributed without the express consent of Nikko AM Asia. While reasonable care has been taken to ensure the accuracy of the information as at the date of publication, Nikko AM Asia does not give any warranty or representation, either express or implied, and expressly disclaims liability for any errors or omissions. Information may be subject to change without notice. Nikko AM Asia accepts no liability for any loss, indirect or consequential damages, arising from any use of or reliance on this website.

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