Goldman Sachs trims expectations for China WGBI weighting to 5.1%

FILE PHOTO: A sign is displayed in the reception of Goldman Sachs in Sydney
FILE PHOTO: A sign is displayed in the reception of Goldman Sachs in Sydney, Australia, May 18, 2016. REUTERS/David Gray

March 18, 2021

LONDON (Reuters) – Goldman Sachs said on Thursday it expected index provider FTSE Russell to include China’s sovereign debt in its World Government Bond Index (WGBI) from October 2021, though with a lower than previously forecast weighting of 5.1%.

FTSE Russell is due to provide an update on its review to include China bonds in the benchmark after the market close on March 29.

Goldman Sachs had previously estimated that China would have a weighting of 6.5% though said it had revised this lower after FTSE Russell tweaked its threshold of minimum outstanding amount for eligible bonds.

Despite the lower weighting, the bank kept its estimate for annual inflows into China bond markets at $120-140 billion, citing stronger than expected year-to-date inflows offsetting lighter flow expectations post inclusion.

“We expect China’s inclusion date of October 2021 to remain unchanged, although we think there is a chance that the 12-month phase-in period could be extended, as third-party FX guidelines have just been released and several investors are still opening accounts,” Goldman Sachs’ Danny Suwanapruti said in a note to clients.

(Reporting by Karin Strohecker; Editing by Mark Heinrich)