Bonding with China
China is cracking open another door to outside investors for its financial markets.
Hong Kong and mainland Chinese officials last month approved a long-awaited cross-border bond trading program, adding to two stock trading links launched in recent years.
There’s heavy speculation the program, known as Bond Connect, could launch in early July — timed auspiciously to coincide with Hong Kong’s 20th anniversary of Chinese rule.
The bond link will initially operate only one way, giving foreign investors wider “northbound” access via Hong Kong-based financial institutions to China’s bond market, the world’s third largest.
Mainland Chinese must wait for “southbound trading” in the former British colony for now, officials say.
Analysts say Bond Connect does away with quotas and onerous requirements for foreign investors in bonds and alleviates worries about taking their profits out of China. Downsides include the weakening Chinese currency and concerns about the reliability of China’s domestic credit rating agencies.