CHAT APPS RULE CHINA BOND MARKET
Unique trading culture, exclusive use of Chinese language in QQ groups also barriers to foreign investors
ANEW scheme that connects China’s local bonds with Hong Kong promises to open the country’s US$9 trillion (RM38.6 trillion) debt market to global investment — but investors venturing into the mainland are coming to terms with the massive community that does business not on trading platforms, but social chat apps.
The “Bond Connect” programme launched this month allows international investors to buy and sell in China’s historically restricted interbank bond market through a Hong Kong trading gateway and has been hailed as a milestone in the opening up the country’s capital markets.
On the mainland, however, much of the turnover in the bond market is generated from informal chat groups on QQ, a mainstream Chinese mobile chat app, where individual investors look to buy, sell, borrow and lend.
In these social chat versions of old-fashioned open outcry sessions, the raw market emotions of fear and greed are played out with emojis and colourful language.
“One QQ group that I belong to has trading volumes of 10 billion yuan in one day,” said a trader at an asset management firm, referring to trades that originate in the chat groups.
This volume dwarfs the 7.05 billion yuan traded through the entire Bond Connect on its first day of operation on July 3.
While there is no data showing the aggregate trading volume on QQ, the trader said it was one of the most popular platforms for mainland bond trading.
While buyers and sellers meet in the chatrooms, the trades are not conducted within these groups. Instead, traders invite counter-parties to open private chats, usually still in QQ.
Launched in 1999 by Tencent Holdings, QQ was once the country’s most popular chat platform. In recent years, it has been overtaken by WeChat, also owned by Tencent, but still boasted 861 million active users as of March.
A trader at an Asian bank in China said she used QQ for more than 90 per cent of her trades, even though the practice was officially discouraged by her bank for security reasons.
While messaging apps are used in other countries to set up trade orders, the scale of China’s bond market and its historic isolation from the rest of the world have led to the evolution of a unique chat group trading culture on the mainland.
“Through the open platform and QQ groups, we enable our users to be connected to online content developers and a diverse range of interest groups,” said Tencent.
But the highly informal nature of this part of the market and the exclusive use of Chinese language present barriers for many foreign investors trying access the bond market through QQ. Reuters