One-way Bond Connect coming this year, says Li

The Bond Connect scheme allowing foreign investors access to the Mainland bond markets will materialise in 2017, Chinese premier Li Keqiang announced during a press briefing on March 15.

  • By Noah Sin, Paolo Danese
  • 15 Mar 2017
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The scheme has long been in the works and is part of the Hong Kong Exchange’s (HKEX) strategic plan, though few details about how the scheme will work have emerged.

“We must further explore opening up the bond market,” Li said at a press conference to mark the end of the latest National People’s Congress session. “This is what the country needs and Hong Kong has the platform. This year we will prepare to test drive a Bond Connect that will permit offshore capital to purchase Mainland bonds from overseas for the first time.”

Ken Tai, Asian FX strategist with Mizuho, said the Bond Connect will advance China’s globalisation strategy.

“The announcement of on-offshore Bond Connect within this year also suggests that China will push forward RMB internationalisation through opening up its onshore RMB asset market to foreign investors,” said Tai in a statement.

HKEX said the scheme will be a breakthrough development for the Chinese capital markets and that it is working on finalising the scheme.

“HKEX is progressing with the preparatory work for Bond Connect under the guidance of the Mainland and Hong Kong authorities,” the exchange said in a statement. “A further announcement will be made by the relevant parties in due course.”

HKEX and the regulators have yet to reveal any specifics about the scheme, for example, whether it will function in two directions, similarly to the Stock Connect scheme, or whether it will only allow inbound investments into China, as Li’s statement seems to imply.

GlobalRMB reported on January 23 that HKEX was looking to provide Bond Connect trading capabilities via the Tradeweb platform. Both organisations declined to comment at the time. 

Other infrastructure providers are also working on their own linkages. European international central securities depository Clearstream said on March 3 it was establishing its own connectivity with its Chinese counterpart, the China Central Depository and Clearing (CCDC).

HKEX has also said it will include exchange-listed bonds to the eligible securities under the existing Connect scheme this year, although that addition is not considered part of the Bond Connect scheme launch. 

Li also touched on China’s RMB policy this year, noting that China will strive to keep the RMB at a stable level and that this would also help overall global monetary stability.  

  • By Noah Sin, Paolo Danese
  • 15 Mar 2017

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3 Agricultural Bank of China (ABC) 10.59
4 HSBC 6.99
5 Industrial and Commercial Bank of China (ICBC) 6.36

Panda Bond Database

Pricing Date Issuer Country Size Rmb (m)
1 16-Mar-17 Rusal Russian Federation 1,000
2 14-Mar-17 Daimler Germany 3,000
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4 23-Nov-16 China Everbright Limited China 4,000
5 14-Nov-16 China Traditional Chinese Medicine Holdings China 2,500

Offshore RMB Bond Top Bookrunners

Rank Bookrunner Share % by Volume
1 Credit Agricole 12.89
2 Bank of China (BOC) 12.08
3 HSBC 9.64
4 Standard Chartered Bank 7.80
5 DBS 5.74

Latest Offshore RMB Bonds

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4 25-Oct-16 ICBC Tokyo branch China 500
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