China’s economy is breaking step with global markets, carving out a niche as a stable investment destination amidst turbulence. Investors are taking notice, with the country’s bond market being the world’s strongest since the Middle East conflict began. The yuan has also climbed against the dollar, making mainland blue-chip stocks an attractive option.

Detached from Traditional Drivers

China’s relative insulation from global market forces reflects an economy out of sync with inflationary cycles in the rest of the world. The local currency’s 5.4% advance against the dollar over the past 12 months has come despite broad dollar strength and rock-bottom yields, and is reflective of strong exports as well as authorities’ encouragement of a slow, steady rise.

Regulators, state banks, and state-backed investors have swung behind promoting stability as a policy goal, analysts say. This has supported the standout gains for the yuan, which is seen going further, with global banks revising up year-end forecasts for gains beyond June’s 3-1/2-year high.

Foreign Investor Comeback

Global asset managers have turned buyers of stocks and bonds in a sea change for a market some had called ‘uninvestable’ only a few years ago. There has been renewed demand for China bonds, driven by relative safety and low volatility. China’s benchmark 10-year sovereign yields are down almost 10 basis points to 1.73% since the start of the Iran war, against a 51 basis-point rise for 10-year U.S. yields.

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.