China people & markets round-up: Banks pledge $5bn for BRI, Tradeweb lines up Bond Connect upgrade, Chinese exchange proposes two-year CGB futures
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China people & markets round-up: Banks pledge $5bn for BRI, Tradeweb lines up Bond Connect upgrade, Chinese exchange proposes two-year CGB futures

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Chinese lender ICBC partners with a German lender to finance Belt and Road projects, Tradeweb prepares to make Bond Connect trading more liquid, and China Financial Futures Exchange (CFFEX) starts consultation on introducing two-year futures for Chinese government bonds.

  • ICBC and Commerzbank have signed a memorandum of understanding (MoU) committing $5bn for projects in Belt and Road countries, Commerzbank said in a July 19 press release. The lender said it is the first German bank to sign a memorandum of understanding with ICBC .

    Th e two banks will co-operate to offer a range of services in these markets, ranging from DCM, transaction banking, to asset management and corporate advisory, according to the press release .

    Nikolau s Giesbert, a divisional board member of Commerzbank, said the deal is good news for both European and Asian businesses.

    “Commerzbank’s strong distribution capabilities in Europe combined with ICBC’s knowledge of the Chinese market will add value for German and European corporates as they navigate business opportunities along the trading corridors, and support Asian companies seeking to do business in Europe,” he said.

  • Bond Connect investors will enjoy the addition of dealer indicative pricing on Tradeweb’s platform this summer, which could boost liquidity on the trading link, Tsai Renn Li, head of Asia at Tradeweb, told GlobalRMB.

    Instead of investors asking for prices, dealers would offer indicative prices throughout the trading day. Investors will see which bonds are more liquid, by looking at the number of indicative prices available. They can also see which dealers are offering the best prices .

    U p until now, offshore investors can only use Tradeweb for Bond Connect trading. But this could change soon, as Bloomberg said this month that it will launch its own platform in the near future. Tsai, however, believes Tradeweb can hold on to its leading role in this market.

    “We have the first-mover advantage, having established a significant global network of investors,” he said. “That allows us to understand what investors want.”

  • CFFEX has begun a public consultation on introducing bond futures for two-year Chinese government bonds, the exchange said in a July 18 statement. The consultation will run until July 24.

    According to a draft version of the futures contract, bonds with tenors of no more than five years, which will mature between one and half years and 2.25 years, will be eligible as underlying bonds. The exchange only offers futures five and 10 year CGBs at the moment.

  • In June, RMB financing was more expensive onshore than offshore, according to Bank of China’s Credits Investment and Financing Environment Difference Index (CIFED). The index finished the month at 31.4 points, up 48.4 points from May. It lost 13.4 points and 31.9 points in May and April, respectively.

    The bank attributed the rise to tightened liquidity at the end of the second half, and a rise in yields for real estate bonds, which offset the fall in bonds issued by the likes of commercial banks. BOC said the index will continue to be volatile moving forward, given that trade tensions between China and the US persist, and as market sentiments continue to swing amid fears of further defaults.

  • Shenzhen Stock Exchange (SZSE) has introduced tri-party repo, the bourse said in a July 13 statement.

    A tri-party repo takes place when the management of post-trade services, such as collateral selection and custody, is outsourced to a third party .

    Upo n the launch, market participants can use a wider variety of products as collaterals, compared with bond pledge-style repo, including privately placed bonds and asset-backed securities, said SZSE. The new service will increase bond liquidity in the Shenzhen exchange market, and improve liquidity management services for market participants, said the bourse .

    SZSE’s move came after the Shanghai Stock Exchange introduced tri-party repo in early May.


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