Foreigners Cut China Bond Holdings for First Time in 10 Months

(Bloomberg) -- Foreign investors cut their holdings of Chinese debt last month for the first time since February, taking profit in some of the year’s top-performing notes.

Overseas funds sold a net 9.8 billion yuan ($1.4 billion) to own 2.2 trillion yuan of onshore bonds by the end of December. That’s according to ChinaBond and Shanghai Clearing House data, which covers more than four-fifths of the market. Short-term debt instruments known as negotiable certificates of deposit saw the biggest drop in ownership, followed by policy-bank bonds.

The shift in market sentiment that started last month may have triggered the profit-taking, with stocks rallying around the world after Beijing and Washington made progress on a phase-one trade deal. The selling came even though a stronger yuan increases the attractiveness of mainland-listed assets to overseas investors.

Purchases of Chinese government debt continued in December. Foreign investors now own more than 1.3 trillion yuan in sovereign notes, or about 8.5% of that market, according to the data.

--With assistance from Claire Che.

To contact the reporter on this story: Molly Dai in Singapore at bdai13@bloomberg.net

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Sofia Horta e Costa, Fran Wang

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