《Asia Credit》.pdfVIP

Deutsche Bank Markets Research Asia Credit Date China 10 November 2015 Harsh Agarwal, CFA Colin Tan, CFA Research Analyst Research Analyst Asia Credit (+65) 6423 6967 (+852) 2203 5720 harsh.agarwal@ colin.tan@ Is there a bubble in Chinas onshore Kalvin Fernandes bond market? Research Associate kalvin.fernandes@ No, but... A number of investors have asked us this question in the past month. It’s not surprising as this topic has been making mainstream press recently. However, some good work done by our equity and FX/rates colleagues (Hans Fan and Linan Liu) in this area has stayed hidden from credit investors. So, drawing a leaf out of their book and adding some color from our side, we present a few thoughts in this report. Bottom line, we agree with the consensus view that there is no bubble at this stage, at least not through the channels we saw in China’s equity market in 3Q, i.e., high retail participation and leverage. This is mainly given the fact that size of exchange listed bond market in China is still small, though growing at a rapid pace. Also, retail participation and leverage are not very high. Our biggest concern currently is t