August's most read: Ping An to add $7.7bn in real assets; Nippon Life's PRI appointment boosts Japan’s ESG push

Ping An to push forward with real asset investments despite headwind; Nippon Life's PRI appointment boosts Japan’s ESG push; how crypto firm licences could prompt investments; global asset owners' growing appetite for Chinese government bonds; rating agencies in China under pressure amid bond defaults; and more.
August's most read: Ping An to add $7.7bn in real assets; Nippon Life's PRI appointment boosts Japan’s ESG push

Ping An to add $7.7bn in real assets despite China property headwind

China’s Ping An Insurance is pressing ahead with adding positions in real estate and infrastructure investments, despite net profits dropping by $3.2 billion because of exposure to a troubled domestic property developer in the first half of 2021.

Ping An is one of China’s largest property investors, with an annual budget of 50 billion yuan ($7.7 billion) for new real assets, 10% of the total it spends on new investments each year, according to Chan.

Target assets include office buildings, logistics, public and private rental housing, industrial parks, and urban renewal projects.

On Monday (August 30), Reuters reported that the China Banking and Insurance Regulatory Commission had opened a probe into Ping An’s investments in the property market to uncover and contain risk connected to its property investment portfolio.

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Nippon Life's PRI appointment boosts Japan’s ESG push

Nippon Life Insurance’s recent senior appointment to the United Nation’s Principles for Responsible Investing (PRI) is set to boost Japanese life insurers’ net zero progress.

The country’s largest life insurance and private institutional investor announced on July 19 that its special advisor to the board, Takeshi Kimura, who was with Bank of Japan for over 30 years, was elected as a board member to the influential nongovernmental organisation in global ESG development. He will retain the position until the end of 2023.

This is the first time that a PRI board member has been elected from an insurance company. Kimura is also the only board member from Asia among the 13-strong global board.

“This is going to be really valuable, to have the insights that Takeshi-san will be able to bring to our strategy, and to aid our understanding in how insurers implement responsible investment and how that differs to other types of investors,” said Matthew McAdam, PRI’s director of Asia-Pacific.

Why Singapore’s institutional investors could soon warm to cryptocurrencies

Singapore's efforts to regulate cryptocurrency operators are moving crypto closer to the mainstrean and could encourage institutional investors to hold the asset class in the near future, experts believe.

The Monetary Authority of Singapore (MAS) last week announced that it was ready to grant operating licences to several cryptocurrency firms, part of government moves to turn Singapore into a leading cryptocurrency hub for the region.

In 2019, the regulator announced exchanges and other cryptocurrency businesses would require a licence to operate under the new Payment Services Act (PSA). However, it granted temporary exemptions to some cryptocurrency platforms including Binance and Coinbase.

“GIC and Temasek are two of the world’s most sophisticated investors and are miles ahead of other sovereign wealth funds when it comes to all-things technology – so it is only natural they are making incursions into cryptocurrencies and blockchains,” said Diego Lopez, managing director of Global SWF.

Chinese government bonds: it’s not all about yields

This story is part of our fixed income deep-dives for the month of August.

Higher yields, the internationalisation of the Renminbi, improved liquidity, and China’s recovery are contributing to global asset owners’ growing appetite for Chinese sovereign bonds in their fixed income portfolio, despite regulatory risks.

With developed markets sovereign bond yields hovering around 1%, and at times falling into negative territory, Chinese government bonds are looking more attractive, trending from 2.1% to as high as 3.4%.

“What's interesting is that compared to most of the developed market bonds which central banks have been aggressively buying, therefore having alleviated prices, Chinese government bonds trade is reflective of fundamentals, so the yield is higher,” said Keiko Kondo, deputy head of multi-asset investment for Asia at Schroders.

Out of $18.9 billion inflows into emerging market debt in June, over a quarter went to Chinese bonds, according to the Institute of International Finance.

Rating agencies in China under pressure amid bond defaults

China’s newly issued regulations for credit rating agencies are a welcome step to bringing better oversight to the scandal-ridden industry, experts said, but a ratings gap between those by local agencies and foreign players continues to raise eyebrows.

Beijing has been tightening rules for the industry since 2017, but high-profile bond defaults by the likes of property developer China Evergrande and bad-debt manager China Huarong Asset Management have continued into this year, raising concerns about the country’s credit system, while also placing the credibility of rating agencies under a microscope.

In bond markets around the world, domestic agencies tend to give local firms higher ratings compared with global agencies.

However, the differences in ratings are particularly striking in China. Both the median and average for domestic ratings are higher than global ratings by seven notches (AA/Aa2 vs. BBB-/Baa3), the report noted. For instance, Lianhe Ratings Global provided a higher rating than its foreign rivals on Chinese property developer Agile Group lately

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