China opens US$9trn bond market to foreign investors

China's markets open up

China's markets open up

Claudia Calich, Emerging Market Debt Manager at M&G Investments, said: "The China - Hong Kong bond connect is another gradual step that China is taking in opening up its domestic bond market for foreign investors".

The early signs bode well for building an active debt market, with more than 2 billion yuan ($295 million) of bonds purchased in the first 22 minutes of brisk trade. The southbound trading, still under planning, will allow mainland investors to invest in Hong Kong's bond market.

During the first trading day for the bond connect, 70 foreign institutions completed 142 bond transactions, worth 7.05 billion yuan.

Chinese regulators have also shown greater flexibility in adopting worldwide standards, with foreign investors being allowed to settle bond transactions on a T+2 basis, on top of the original T+0 and T+1 arrangement.

"We continue to hold the view that there could be more than $1 trillion of additional global fixed income investments to be allocated to China domestic bonds over the coming decade", a note from Goldman Sachs said on Monday.

The move is the latest in China's efforts to attract global investors to its vast government and corporate debt markets, the world's third-largest, with its outstanding bonds hitting over US$9 trillion in 2016.

Accused kidnapper was a former U of I student
Investigators had also placed Christensen under surveillance after they interviewed him in mid-June, according to court documents. University spokeswoman Robin Kaler said Saturday she couldn't immediately confirm Christensen is enrolled at the university.

The launch of the connection was timed to coincide with the 20th anniversary of Hong Kong's handover to Chinese rule and trading will initially commence "northbound", meaning foreign investors will be able to buy and sell Chinese bonds.

Ivan Chung, associate managing director at Moody's, said the program would boost yuan internationalization as it enlarges the pool of investable yuan-denominated assets for foreign investors. We will increasingly see Central Banks buying Chinese government bonds.

The Bond Connect programme is Beijing's latest attempt to open up its financial markets and attract foreign capital. The yield on China's benchmark 10-year government bond dipped 0.04 percentage point to 3.53%, while. HSBC said it is one of the underwriters.

"For foreign investors wishing to access the Chinese market, the Bond Connect would be a more attractive option than the current practice of accessing the interbank bond market, in terms of limits in quota, convenience in trading and criteria in clearing", said Zhang Dong, vice president of Ping An Securities, noting that he sees "an vast growth opportunity".

The move could further boost the Shenzhen Hong Kong Stock Connect trading link which was launched at the end of past year, alongside the existing Shanghai trading link.

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