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RMB round-up: China, UK plan Bond Connect, Hong Kong signs BRI agreement, Man Group launches first PFM fund

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By Noah Sin
15 Dec 2017

British and Chinese officials consider launching a bond link between the two countries, Hong Kong and National Development and Reform Commission (NDRC) sign agreement to promote the city’s participation in the Belt and Road Initiative (BRI), and Man Group sets up the first fund under its private fund management (PFM) licence.

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Bonds:


  • China and the UK are planning to establish a two-way Bond Connect, and have agreed to set up a working group to study the feasibility of the mutual market access programme, according to a December 13 media report. The plans came after China launched a northbound-only Bond Connect with Hong Kong in July.
    The report also cited sources as saying that the UK hopes to issue sovereign Panda bonds in China’s interbank bond market but noted that the UK Treasury has said it has no plans to issue bonds outside its current gilt program.
    The news came ahead of the ninth China-UK Economic and Financial Dialogue (EFD), which will take place in Beijing on December 15 and 16, according to a Chinese Foreign Ministry spokesperson.
    The UK Treasury said in a December 15 statement that the two sides will discuss expanding their co-operation in financial services and that over £1bn worth of deals will be concluded during the EFD.
    “The EFD will build on progress made through previous dialogues, which has included supporting the development of London as the leading offshore RMB trading hub,” the UK Treasury said.
  • The financing cost of renminbi bonds continued to be cheaper offshore than onshore in November, according to Bank of China’s Credits Investment and Financing Environment Difference index. The index gained 46.7 points to 113.1 points in the month – a positive value that shows yields are lower in the offshore RMB bond market.


Belt and Road:


  • NDRC and Hong Kong have signed an agreement to facilitate the city’s participation in the BRI, according to a statement by the Hong Kong government on December 14.
    Under the agreement, NDRC and Hong Kong will support RMB internationalisation by improving the channels for two-way cross-border RMB fund flows, promoting China’s cross-border interbank payment system for payment and settlement for cross-border RMB business, and further enhancing mutual access between China’s and Hong Kong’s capital markets.
    Hong Kong will also develop a green bond market and host Chinese enterprises aiming to raise funds for green projects related to the BRI, and help establish an internationally recognised green bond certification institution, according to the agreement.


Investment:


  • Man Group has launched the first fund under its PFM licence in China, the asset manager said in a December 11 press release.
    The fund, which was set up by Man Group’s wholly foreign-owned enterprise (WFOE) in Shanghai, will target listed futures, with underlying assets ranging from agricultural and industrial commodities to bonds, metals, energy and stock indices.
    The launch came after Man Group’s WFOE obtained its PFM licence in September. Two local institutions – Industrial and Commercial Bank of China and Guotai Junan Securities – will act as custodians to the fund.


Regulators:


  • China will accelerate the internationalisation of its capital markets, said Fang Xinghai, deputy chairman of the China Securities Regulatory Commission (CSRC).
    The country will ease access to its futures market, promote co-operation and competition between Chinese and foreign institutions and stock exchanges, and strengthen the market’s ability to serve the real economy, said Fang.
    Fang’s comment came after Liu Shiyu, chairman of CSRC, said last week that the development of China as a capital markets power is a key part of the China Dream vision outlined by president Xi Jinping.


By Noah Sin
15 Dec 2017