HKBondCon­nect gets reg­u­la­tors’ green light

China Daily European Weekly - - CHINA NEWS - By LUOWEITENG sophia@chi­nadai­lyhk.com

Chi­nese main­land and Hong Kong reg­u­la­tors gave the green light onMay 16 to a long-an­tic­i­pated cross-bor­der trad­ing link that makes the main­land’s $9.5 tril­lion (8.6 tril­lion eu­ros; £7.3 tril­lion) bond mar­ket more ac­ces­si­ble to over­seas in­vestors.

The trad­ing plat­form, called Bond Con­nect, will op­er­ate along­side the two ex­ist­ing cross-bor­der Stock Con­nect pro­grams be­tween the Chi­nese main­land and Hong Kong, in a sign of the na­tion’s de­ter­mi­na­tion to make its cap­i­tal mar­ket more global.

Ac­cord­ing to Hong Kong Mon­e­tary Au­thor­ity and Peo­ple’s Bank of China, the pro­gram will start with “north­bound trad­ing”, al­low­ing in­ter­na­tional and Hong Kong in­vestors to trade on­shore bonds in the ini­tial phase.

The date for the of­fi­cial launch of Bond Con­nect will be dis­closed later, and “south­bound trad­ing” will be­gin at the proper time, reg­u­la­tors said in a joint state­ment.

The trad­ing plan is the lat­est push to ease ac­cess to the world’s third-largest bond mar­ket, where in­ter­na­tional own­er­ship is less than 2 per­cent, as pol­i­cy­mak­ers look to en­cour­age over­seas in­vestors to is­sue bonds and to in­vest in the do­mes­tic mar­ket.

It stands as an­other ma­jor move from Bei­jing to shore up Hong Kong’s devel­op­ment and deepen the grow­ing cross-bor­der eco­nomic and fi­nan­cial ties, look­ing to ce­ment the city’s po­si­tion as a world-renowned fi­nan­cial cen­ter and en­sur­ing its long-term pros­per­ity and sta­bil­ity, said the state­ment.

“Bond Con­nect marks an­other mile­stone in the lib­er­al­iza­tion of the main­land’s cap­i­tal ac­count, con­sti­tut­ing an­other ma­jor com­po­nent of the coun­try’s cap­i­tal mar­ket,” HKMA Chief Ex­ec­u­tive Nor­man Chan Tak-lam said on May 16.

“Hailed as Asia’s premier in­ter­na­tional fi­nan­cial hub, Hong Kong is strate­gi­cally po­si­tioned as the nat­u­ral gate­way link­ing our main­land to the world,” he said. “The pro­gram is an­other ma­jor move that uses the Hong Kong plat­form to strengthen the con­nec­tiv­ity be­tween main­land and global cap­i­tal mar­kets.”

Given the sheer size of China’s debt mar­ket and its short his­tory of devel­op­ment, the bond trad­ing link it­self comes as a mam­moth project that calls for build­ing a great deal of in­fra­struc­ture from scratch to set up a frame­work for clear­ing, cus­tody, ex­e­cu­tion and set­tle­ment. A lengthy con­struc­tion pe­riod also will be needed.

PBOC said this ex­plains why the pro­gram will roll out in a pro­gres­sive man­ner, go­ing ahead first with “north­bound trad­ing”.

DAILY PRO­VIDED TO CHINA

A passerby at the gate of a bank in Hong Kong. Chi­nese main­land and Hong Kong reg­u­la­tors have given the green light to Bond Con­nect.

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