Hong Kong, China regulators approve 'Bond Connect' scheme

18 May, 2017, 17:44 | Author: Ora Austin
  • Reuters

Through the platform, Hong Kong will leverage its "role as an worldwide financial center, as well as an intermediary for capital flows between the mainland and global markets".

The rental gap between the most and least expensive grade A office buildings in Hong Kong can be as wide as HK$145 per square foot per month, which translates into annual rental savings of as much as HK$174 million for a tenant moving a 100,000 square foot office outside of Central, according to JLL.

They will collaborate with the Hong Kong Exchanges and Clearing (HKEX) and Central Moneymarkets Unit in establishing mutual bond market access between Hong Kong and mainland China.

A total of 473 overseas investors hold 800 billion yuan of outstanding investment in the interbank bond market. Foreign investors' holdings of Chinese onshore notes rose to 830 billion yuan (RM517.8 billion) in March, from 815 billion yuan in February, according to central bank data.

China Tuesday announced the approval of a bond connect program between the mainland and Hong Kong markets in the latest effort to support the financial hub and accelerate the country's opening up progress.

Similar trading programs linking Hong Kong to the Shanghai and Shenzhen stock markets launched in 2014 and 2016, respectively.

Authorities are seeking to counter outflows and win inclusion in global bond indexes.

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"The company is optimistic of the long term prospect of this investment", it said of the HK$23.28 billion purchase in a filing to the Hong Kong stock exchange.

"It will provide a new channel for Hong Kong and worldwide investors to invest in mainland China's bond market, which is the third-largest in the world and much undersold to global investors at the moment", said Benjamin Hung, chief executive for Greater China & North Asia at Standard Chartered.

The regulators said "Bond Connect" will follow the current framework for overseas participation in the China interbank bond market, meaning a range of foreign investors including pension funds, central banks and sovereign wealth funds would be eligible to trade Chinese government bonds, local government bonds, policy bank bonds and corporate debt instruments.

Henderson Land will finance the acquisition through its internal resources and bank funding, and plans to complete an office building, with some retail facilities, by 2022, the company said in a statement.

Reuters reported past year the Hong Kong stock exchange was in talks with Tradeweb, a fixed income trading platform, to connect to China's bond market, citing sources.

CFETS and HKEX will continue to work closely under the guidance of PBC and HKMA and together with the market entities and custodian and settlement institutions in both markets to prepare for the launch of Bond Connect.

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