SOURCE / ECONOMY
MOF issues yuan debt in HK ahead of major bond connect program
Published: Sep 23, 2021 08:08 PM
Fishing boats in Hong Kong are draped with celebratory flags and banners marking the 100th anniversary of the founding of the CPC and  Hong Kong's 24th anniversary of return to China.  Photo: IC

Fishing boats in Hong Kong are draped with celebratory flags and banners marking the 100th anniversary of the founding of the CPC and Hong Kong's 24th anniversary of return to China. Photo: IC


The Ministry of Finance (MOF) on Thursday issued 8 billion yuan ($1.24 billion) worth of yuan-denominated bonds in the Hong Kong Special Administrative Region (HKSAR), just a day ahead of the scheduled launch of the southbound leg of the bond trading linkup between the Chinese mainland and the HKSAR.

The long-anticipated southbound trading of the Bond Connect is scheduled to be launched on Friday and, according to some estimates, could bring as much as $46 billion to the HKSAR market each year.

Both of the moves are major steps to further expand two-way financial opening-up and boost the HKSAR's financial market, analysts said on Thursday.

The MOF will issue a total of 20-billion-yuan worth of yuan-denominated bonds in Hong Kong in 2021, with the first batch going for auction on Thursday.

Analysts pointed out the issuance will better meet the demand for the allocation of yuan assets by international investors, which will strongly contribute to the process of the yuan's internationalization and demonstrate China's confidence and determination in opening up to the outside world. 

The issuance will help consolidate the HKSAR's position as an international financial hub and a significant offshore yuan center, while enhancing the international status of the yuan, Xi Junyang, a professor at the Shanghai University of Finance and Economics, told the Global Times on Thursday.

The launch of the southbound trading of the Bond Connect will also improve the two-way opening-up of China's bond market and solidify Hong Kong's role as a bridgehead and hub connecting the mainland and the global markets, the People's Bank of China (PBC), the central bank, said earlier.

The two-way opening-up of China's capital market comes as the expansion of the offshore yuan market in Hong Kong has established a solid basis for the launch of the southbound leg, Dong Dengxin, director of the Finance and Securities Institute of Wuhan University, told the Global Times on Thursday. 

Dong said that the launch of the southbound leg will be particularly beneficial to investors from the Chinese mainland in entering the markets in Hong Kong and Macao.

The annual quota for southbound trading under the bond connect is set at 500 billion yuan ($77.42 billion) with a daily quota of 20 billion yuan, said the PBC. 

As for the expected transactions and scale on the first day, Dong expressed optimism, noting that transactions will depend on the scale of the overseas market and the actual invested capital, while uncertainties remain. 

Global Times


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