Bond Connect northbound trading kicks off today

Top News | Reuters and Dominique Nguy 3 Jul 2017

Foreign investors can start trading Chinese corporate bonds from today.

Initially, trading will be northbound, meaning mainland investors cannot buy and sell Hong Kong-listed debt. No date for that has been set.

Bond Connect is Beijing's latest measure to open its capital markets, following trading between the Hong Kong, Shanghai and Shenzhen stock exchanges.

The People's Bank of China and the Hong Kong Monetary Authority said yesterday that northbound "trading regulations, policies and operational and supervisory arrangements have been finalized, technical systems are ready, and market promotion as well as on-boarding are both under way."

A launch ceremony will be held this morning in Hong Kong, with new Chief Executive Carrie Lam Cheng Yuet- ngor attending.

"Bond Connect will be a catalyst for the continuing development and globalization of China's bond market," said Peter Wong Tung-shun, deputy chairman and chief executive of the Hongkong and Shanghai Banking Corp.

Bank of China (Hong Kong) vice chairman Yue Yi said the launch provides offshore investors with convenience and more choices for investing in China's onshore bond market.

Standard Chartered's John Tan Ming-kiu, head of financial markets for Greater China and north Asia, said China's US$9 trillion (HK$70 trillion) bond market is the world's third largest yet is relatively undersold to foreign investors. Bond Connect means more global debt indices will include Chinese bonds in the foreseeable future, he added.

To mark the launch, China Development Bank will today issue up to 20 billion yuan (HK$23 billion) in one- year, three-year and 10-year fixed-rate bonds for tender.

Access to China's bond market through the program will be restricted to overseas institutional investors such as banks, insurers, brokerages and investment funds. Trades will not be subject to quotas.

Xie Xiaoli, head of international business at Ping An Asset Management, said it will be a gradual process for foreign capital to flow into China's bond market. "At the moment, the size of foreign investors' investment in the domestic bond market is about 830 billion yuan, accounting for less than 2 percent of market share," she said.

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