Financials weigh on bond market as investors turn to bank stocks

(ATF) Losses in financial names dragged down the flagship China Bond 50 and the ATF ALLINDEX Financial indices on Tuesday, as bank stocks rallied on the back of the country’s latest move to ease pressure on financial institutions.

The China Bond 50 index fell 0.05%, while the ATF ALLINDEX Financial lost 0.04% respectively.

The ATF ALLINDEX Financial index, seen here, lost 0.04%.

China Huarong Asset Management bonds led the losses in both indices, with its bond prices falling 1.38%. The bonds of Hua Xia Bank, Bank of Communications, Huishang Bank and the Export-Import Bank of China also fell, losing 0.25%, 0.19%, 0.17% and 0.13%. China Securities, a constituent of the ATF ALLINDEX Financial, further weighed on this index, losing 0.14%.

The ATF ALLINDEX Corporates sub-gauge rose 0.04%. Fuyang Construction bonds drove gains in the Corporates index, rising 0.79%, while Jizhong Energy rose 0.02%.

Meanwhile, the CSI300 index and the Shanghai Composite index inched up 0.1% with banks leading the gains in the CSI300 banks index, which rose 2.6%, according to Reuters. This followed an announcement by the People’s Bank of China (PBoC) that it will extend the transitional period for the implementation of new asset management rules by one year to the end of 2021. The move aims to ease the impact of the pandemic on financial institutions, according to a statement by the PBoC.

The rules, originally due to take effect at the end of 2020, aim to bring major improvements in stability, transparency and innovation, to curtail the shadow banking sector and reduce financial risk, according to JPMorgan. However, the implementation of these regulations may trigger volatility and uncertainty at a time when financial institutions are already reeling. In June, the government urged banks to sacrifice 1.5 trillion yuan ($220 billion) in profits by deferring loan payments, offering cheaper loans and lending to risky borrowers.