Bond Con­nect opens, giv­ing in­vestors a win­dow to main­land

China Daily (Hong Kong) - - FRONT PAGE - By LUO WEITENG in Hong Kong sophia@chi­nadai­lyhk.com

The Chi­nese main­land’s Bond Con­nect with Hong Kong — a long-awaited pro­gram that gives over­seas in­vestors di­rect ac­cess to the main­land’s $10 tril­lion debt mar­ket — opened on Mon­day.

The cross-bor­der bond trad­ing link will op­er­ate along­side the two ex­ist­ing Stock Con­nect sys­tems be­tween stock ex­changes in Shang­hai and Shen­zhen and their Hong Kong coun­ter­parts; but it will al­low only in­ter­na­tional and Hong Kong in­vestors to trade on­shore bonds in the ini­tial phase.

Newly in­au­gu­rated Chief Ex­ec­u­tive of the Hong Kong Spe­cial Ad­min­is­tra­tive Re­gion Car­rie Lam Cheng Yuet-ngor said at the launch cer­e­mony in Hong Kong that Bond Con­nect “marks an­other new chap­ter of mu­tual mar­ket ac­cess be­tween the main­land and Hong Kong”.

Lam, in her first of­fi­cial event since tak­ing of­fice as the first fe­male leader of Hong Kong on Satur­day, said the next step — to be taken at the proper time — is to launch “south­bound trad­ing”, which will al­low main­land in­vestors to buy and sell Hong Kong-listed bonds.

Peo­ple’s Bank of China Deputy Gover­nor Pan Gong-

This de­ter­mines whether Hong Kong could win out as the most im­por­tant fi­nan­cial hub in Asian trad­ing hours.” Li Xiao­jia, chief ex­ec­u­tive of Hong Kong Ex­changes and Clear­ing Lim­ited, speak­ing about the sig­nif­i­cance of Bond Con­nect

sheng said at the cer­e­mony that Bond Con­nect “demon­strates the sig­nif­i­cance of Hong Kong as a world-renowned in­ter­na­tional fi­nan­cial cen­ter and the main­land fi­nan­cial in­dus­try’s gate­way to the world”, and it “show­cases the cen­tral govern­ment’s de­ter­mi­na­tion to shore up the long-term pros­per­ity and sta­bil­ity of Hong Kong”.

Bond Con­nect stands as a golden op­por­tu­nity that Hong Kong can­not af­ford to miss in ce­ment­ing its role as the most im­por­tant off­shore

price-set­ter for the ren­minbi, Li Xiao­jia, chief ex­ec­u­tive of Hong Kong Ex­changes and Clear­ing Lim­ited, said after the cer­e­mony.

“This de­ter­mines whether Hong Kong will win out as the most im­por­tant fi­nan­cial hub in Asian trad­ing hours. That’s where the sig­nif­i­cance of Bond Con­nect re­ally lies,” Li said.

The newly launched trad­ing chan­nel wrapped up its first trad­ing day with vol­ume of 7.05 bil­lion yuan ($1.03 bil­lion). Some 142 deals were done be­tween 70 over­seas fi­nan­cial in­sti­tu­tions and 19 mar­ket mak­ers — firms that main­tain a sta­ble and liq­uid mar­ket for a par­tic­u­lar se­cu­rity by buy­ing and sell­ing it as cir­cum­stances re­quire — ac­cord­ing to a state­ment on Chi­na­money.com.cn, a web­site of Na­tional Interbank Fund­ing Cen­ter.

The buy­ing side reached 4.9 bil­lion yuan in 128 deals, un­der­scor­ing the huge ap­petite of in­ter­na­tional in­vestors. A deal be­tween Bank of Com­mu­ni­ca­tions and its Ma­cao branch was said to be the first un­der the pro­gram.

Some 20 mar­ket mak­ers for Bond Con­nect have been con­firmed and ap­proved by the Peo­ple’s Bank of China, in­clud­ing 14 Chi­nese main­land in­sti­tu­tions and six in­ter­na­tional ones.

HSBC joined the likes of China Mer­chants Bank, Deutsche Bank, GF Se­cu­ri­ties and CITIC Se­cu­ri­ties, which rushed to fin­ish its first deal as a mar­ket maker through the new link.

To mark the launch, China Development Bank and Agri­cul­tural Bank of China is­sued a com­bined 35 bil­lion yuan in bonds for ten­der on Mon­day.

As a fit­ting trib­ute to the 20th an­niver­sary of Hong Kong’s re­turn to the moth­er­land, the cross-bor­der bond train marks a mile­stone on the na­tion’s jour­ney to open up its fi­nan­cial mar­kets, and moves a step closer to po­si­tion­ing its on­shore bonds in the group of global fixed in­come in­dexes.

Gold­man Sachs and HSBC said in their lat­est re­ports that the new trad­ing chan­nel, with no quota or need to stip­u­late an in­tended in­vest­ment amount, may pave the way for the world’s third-largest debt mar­ket to be in­cluded in global in­dexes.

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