Lam backs Bond Connect
Chief Executive candidate Carrie Lam Cheng Yuet-ngor supports the Bond Connect between Hong Kong and the mainland — to be launched by the end of the year — saying it will further integrate the two places’ financial markets.
Lam was speaking at an election forum held by 18 Election Committee members from the financial services industry on Wednesday,
Lam said she welcomed Premier Li Keqiang’s announcement — adding that fiscal policies proposed in her election manifesto matched those of Li.
“The central government plans for the first time this year to implement a bond market connect between mainland and Hong Kong,” said Premier Li Keqiang.
“This will help Hong Kong maintain its status as an international finance center, and provide Hong Kong investors with more options,” Li told a Beijing press conference after conclusion of the National People’s Congress session on Wednesday.
Dubbed “Bond Connect”, the program will encourage mutual access if mainland and international investors engage in bond trading in a reciprocal manner.
Under the program, international investors with trading accounts in the SAR are allowed to trade bonds issued on the mainland.
The Shanghai-Hong Kong Stock Connect launched in 2014 and Shenzhen-Hong Kong Stock Connect in 2016 has facilitated mainland and overseas investors’ direct access to each other’s equity markets.
In Lam’s full manifesto, released in Feb 27, the former chief secretary suggested the new government “explore the possibility of a ‘Mainland-Hong Kong Bond Connect’ for direct access to the mainland bond market”. This is to enhance circulation of renminbi products and to reinforce the city’s position as an offshore hub for such business. It will also strengthen Hong Kong’s role as an international asset management center.
The move signals another of the mainland’s ongoing efforts to attract international investors to its bond market. In 2016, the mainland opened up the China Interbank Bond Market to foreign institutional investors. Just last month, it allowed bond investors to hedge currency risks of bonds purchased onshore.
The mainland bond market is the third largest in the world at around $7 trillion, but foreign ownership is very small — at less than 2 percent, according to HSBC. This indicates there is room for growth if access becomes easier.
Former financial secretary John Tsang Chun-wah and retired judge Woo Kwok-hing are also in the race to become the city’s new Chief Executive. John Tsang also said he supported the Bond Connect plan.