FINANCING TOOL
Mainland-HK bond trading link on the horizon
Hong Kong Exchanges & Clearing (HKEx) Chief Executive Li Xiaojia said on Wednesday that he hoped the muchawaited bond trading link between the Chinese mainland and Hong Kong could be launched before July 1, as a fitting tribute to the 20th anniversary of the handover.
The stock exchange boss told the LME Asia Week conference in Hong Kong that he expected “more details” about the cross-border bond trading system to be disclosed in the coming weeks.
The city’s stock market operator, Li pointed out, is currently joining hands with People’s Bank of China and Hong Kong Monetary Authority to progress with preparatory work on the Bond Connect.
He hoped the program could stand a chance of making a debut before July 1, the big day marking the 20th year of the establishment of the Hong Kong Special Administrative Region.
But he reiterated regulatory authorities had the final say in the rollout of the trading scheme, while HKEx has no access to the specific timetable.
Dubbed Bond Connect, the trading platform aims to operate alongside the already existing two cross-border Stock Connect schemes that make the country’s markets more accessible to offshore investors.
The CE O’ s remarks are about the latest move to ease access to the world’s third-biggest bond market, as policymakers in the Chinese mainland look to encourage overseas investors to issue onshore and to invest in the domestic market.
In March Premier LiKeqiang set a general timeline for the Bond Connect to the year-end at a news conference in Beijing, after the close of the annual legislative sessions.
“Like China itself, the $9- trillion domestic bond market is too big to ignore. Yet, international investors hold no more than 2 percent of it,” Li said.
“That’s what makes Bond Connect a much-needed push for the nation’s yet-to-be-opened debt market.”
Unlike the country’s stock markets that have grown for decades, the opening and development of the onshore bond market is far more recent.
Given the sheer size of China’s debt market and its shorter history of development, the concept of Bond Connect itself stands as a “huge leap forward,” Li noted.
But he also said that was also why the bond trading link was a mammoth project, which called for a massive infrastructure buildup from scratch in order to set up a framework for clearing, custody, execution and settlement operations, and a lengthy construction period.
Li said he believed the mega project would not involve a simple one-off launch, adding that even after rollout, it would require years of modifications to ensure its smooth running.