Hong Kong can become multicurrency bond And recently announced moves by Beijing to expand the Connect bond scheme will further enhance the city’s role as a major destination for debt issuance, analysts said.
Earlier this month at the Asian Financial Forum, People’s Bank of China (PBOC) Governor Pan Gongsheng Spoke about Increasing the “Hong Kong asset allocation operation” from the nation’s foreign exchange reserves. He also said that Hong Kong and China will encourage “higher quality companies to list and issue bonds in Hong Kong”. Also at the forum, the authorities announced that the cross-border bond linking scheme would be expanded.
“The PBOC’s latest measures, along with the Hong Kong government’s promotional efforts in recent years, were meant to promote Hong Kong [as] A multi-currency bond issuance environment,” said John Lee Chen-Kwok, vice president and co-head of Asia coverage at UBS in Hong Kong.
Do you have questions about the biggest topics and trends from around the world? Get answers from SCMP knowledgeOur new curated content platform with explainers, FAQs, analysis and infographics brought to you by our award-winning team.
“Many public bodies in Hong Kong have seen increasing interest in multiple bonds from investors who are interested in investing in different currencies.”
Analysts say Hong Kong could become a multi-currency bond hub with support from Beijing. Photo: Dickson Lee Alt = analysts say Hong Kong could become a multi-purpose bond hub with support from Beijing. Photo: Dickson Lee>
To facilitate the growth of the mainland and Hong Kong bond markets, a bond scheme was introduced in 2017, allowing global investors to buy and sell debt issued on the mainland. In 2021, a southern route was added, allowing mainland Chinese investors to buy bonds issued in Hong Kong.
On January 13, Pan revealed further improvements to the canal in the south. Onshore investors can now buy bonds denominated in US dollars and euros using the Connect program. Beijing will also soon allow mainland insurers and securities firms to trade bonds in Hong Kong, which is currently limited to banks.
Dennis Chow Chi-in, Deloitte’s Asia Pacific president, said the changes would encourage more companies from Southeast Asia, India or Japan to raise funds in Hong Kong.
The more multi-currency bonds issued in Hong Kong, the more interest it will attract from funds backed by international investors, Chow said, adding that it will enhance the city’s role as an international financial center.
