HONG KONG: The operator of Hong Kong’s stock exchange said yesterday that it will “probably work very quickly” on a plan to link bond markets in China’s mainland with those in the city, giving global investors more access to yuan-related assets.
The concept would be similar to a landmark program that connected the Hong Kong and Shanghai stock markets in 2014, said Charles Li, chief executive of Hong Kong Exchanges & Clearing.
The plan would allow global banks to develop offshore yuan interest rate products, he said.
“So we probably will work very quickly, trying to build a bond connect similar to the stock connect,” he said.
China’s mainland said earlier this year that it is opening up its interbank bond market to foreigners to provide more avenues for investment.
Moody’s rating agency estimates the mainland’s onshore bond market had 48.5 trillion yuan (US$7.4 trillion) of outstanding bonds at the end of last year, the third-largest globally after the US and Japan.
The Shanghai-Hong Kong Stock Connect had promised to open up the mainland’s capital markets to foreign investors, heralding bolder stock market reforms with the goal of full capital account convertibility.
However, an onshore stock market crash last year and weak markets have discouraged many potential investors, prompting the exchange to widen its focus to adding more currency and fixed-income products to its menu.
The Hong Kong bourse and Thomson Reuters yesterday signed a deal to create a new series of yuan indexes, details of which will be announced in the next few weeks.
The series will offer global investors benchmarks that reflect the development of the yuan’s effective exchange rate against other major currencies and are designed to be transparent and tradeable.
Li said this year will be a big product year focusing on the yuan foreign exchange rate.
