HONG KONG, Feb 10 Reuters Global investors are reducing their holdings of Chinese government bonds, a steady source of secure returns during the pandemic years, as they prepare for some monetary tightening in China and eye juicier stock markets in the reopened economy.

China39;s bond market was the outlier in 2022 as global central banks raised rates hurriedly to fight inflation, while policymakers in Beijing faced a sharp, COVIDinduced slowdown. But now, as the economy reopens swiftly, analysts expect the People39;s Bank of China will eventually rein in stimulus.

Signs of a peak in developed market rates are another reason why China39;s bonds, yielding roughly 3 on 10year investments, are less appealing, given the potential greater capital gains elsewhere.

Data from China39;s Bond Connect platform, the primary avenue for foreigners investing in mainland markets, shows foreigners sold roughly 616 billion yuan 90.63 billion worth of bonds in 2022, taking their holdings down to 3.4 trillion yuan.

That trend has strengthened this year, as per fund managers.

If investors are saying that I want to trade the China recovery, the answer is not Chinese government bonds CGBs. The answer to participating in riskon opportunities in bonds would be Chinese offshore credit and long renminbi, said Jason Pang, portfolio manager of the China Bond Opportunities Fund at J.P Morgan Asset Management.

Investors who have already committed cash to mainland markets might just switch to…