ONE of Australia’s biggest money managers is paving the way for the nation’s huge pool of pension money to tap China’s US$11.6 trillion bond market that is becoming more accessible to foreign investors.

QIC Ltd., a US$74 billion Brisbane-based fund, will be ready to use Bond Connect by year-end, according to Susan Buckley, making it likely Australia’s first money manager to use the trading platform that opened in 2017.

“The clear targets we look at in Australia on top of the asset managers are the superannuation funds and some of the big investors such as QIC, which are definitely high up on our radar,” said Julien Martin, who heads Bond Connect Co.’s joint venture between exchanges in Hong Kong and the Chinese mainland.

He expects daily trading volume to grow fivefold to 30 billion yuan (US$4.39 billion) by the end of next year.

With the world’s third-largest bond market opening up to foreign buyers, Australian asset managers are looking to diversify holdings just as the nation’s pension pool grows faster than those in Britain, the United States and Japan and is forecast to reach US$4 trillion by 2025.

China’s appeal for QIC is to diversify its fixed-income portfolio and access a market with favorable yields, said Buckley, its managing director of global liquid strategies. China’s 10-year government bond yields were at 3.46 percent Friday, compared with 2.95 percent on Treasuries with a similar maturity.

A sliding yuan and a bear market for equities are keeping moves in Chinese markets at the forefront of investors’ minds as policymakers react to cushion a slowdown in Asia’s biggest economy.

“We’re in an orderly sort of depreciation of the Chinese yuan, we’re not feeling like it’s going to be a sharp devaluation although we’ve definitely had a meaningful depreciation,” Buckley said. “It’s in line with probably where we see the economy right now in terms of the slowdown.”

(SD-Agencies)