India bond index inclusion to trigger up to $40 billion inflows, says HSBC


LONDON: Government bonds are likely to be included in global indices in 2022, generating potential inflows of between $ 30 billion and $ 40 billion, HSBC the analysts estimate.
HSBC said that an announcement regarding the inclusion of India in the Bloomberg Global Aggregate Index (BGAI) and the JPMorgan GBI-EM Index (GBI-EM) could occur before the end of 2021, and the inclusion will follow in 2022.
The bonds could absorb potential flows of $ 30 billion to $ 40 billion if government Fully Accessible Path (FAR) securities are included in both indices, HSBC said.
The Reserve Bank of India introduced the FAR last year to attract foreign investors.
Foreign ownership of FAR bonds would increase from the current 3% to 10-13%, HSBC predicted.
“For EM (emerging market) investors, low foreign ownership of Indian Bonds, strong external balances and a relatively low correlation of Indian government bond yields with major bond markets could provide an attractive source of diversification, “analysts said in the note.

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