China’s bond-connect program with Hong Kong, giving offshore investors another way to access China’s US$10 trillion debt market, is to launch today, the People’s Bank of China (PBOC) and the Hong Kong Monetary Authority announced yesterday in a joint statement.
The two institutions also signed a memorandum of understanding on cross-border supervisory cooperation, according to the statement posted on the PBOC Web site.
The first day of trading follows the 20th anniversary of Hong Kong’s handover to China and President Xi Jinping’s (習近平) visit to the territory.
Photo: Bloomberg
The system is to echo the two stock-connect programs between the former British colony and mainland China, but is to initially only allow overseas investors access to the world’s third-largest bond market. It is the latest step in China’s efforts to open up and integrate into the global financial system.
MSCI Inc last month said that it would include China’s shares in its benchmark indices.
“Over the past few weeks, many of our clients have already expressed their interest,” said John Tan (陳銘僑), regional head of financial markets for Greater China and North Asia at Standard Chartered PLC, in e-mailed comments.
The commencement “is essentially good news to the global investors who want to diversify their portfolio while pursuing yields,” he said.
A calendar posted on the Bond Connect’s Web site late on Friday first showed today as the opening of the link, which follows a PBOC program last year that allowed medium and long-term overseas investors to access China’s interbank bond market.
Hong Kong Exchanges & Clearing Ltd the same evening separately said that a launch ceremony was scheduled for today.
Two Chinese policy banks — the Agricultural Development Bank of China Ltd (中國農業發展銀行) and China Development Bank (中國發展銀行) — will start issuing bonds to offshore investors today and tomorrow respectively, according to earlier statements.
The PBOC issued rules for the bond connect on June 21.
The provisions state that the PBOC and related regulators have the right to access offshore investor data, bonds bought by foreign investors are to be held under the name of the nominal holder and offshore investors can use either yuan or foreign currencies.
Overseas investors hold less than 1.5 percent of Chinese onshore notes, according to Bloomberg calculations based on central bank and China Central Depository & Clearing Co data.
About 85 percent of their money was limited to sovereign and policy bank securities, the calculations showed.
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