Hong Kong can become a multicurrency bond hub and Beijing’s recently announced measures to expand the Bond Connect scheme will further enhance the city’s role as a prime 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 “asset allocation operation in Hong Kong” from the nation’s foreign exchange reserves. He also said Hong Kong and China would encourage “more high-quality enterprises to list and issue bonds in Hong Kong”. Also at the forum, authorities said the cross-border Bond Connect scheme would be expanded.
“The latest PBOC measures, alongside the promotional efforts by the Hong Kong government in recent years, are set to promote Hong Kong [as] a hub for bond issuance in multiple currencies,” said John Lee Chen-kwok, vice-chairman 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 the answers with SCMP Knowledge, our new platform of curated content with explainers, FAQs, analyses and infographics brought to you by our award-winning team.
“Many Hong Kong public bodies have seen an increasing interest in multicurrency bonds from investors who are interested in investing in different currencies.”
Analysts say Hong Kong could become a multicurrency bond hub with Beijing’s support. Photo: Dickson Lee alt=Analysts say Hong Kong could become a multicurrency bond hub with Beijing’s support. Photo: Dickson Lee>
To facilitate the growth of the bond market on the mainland and Hong Kong, the Bond Connect scheme was introduced in 2017, which allowed global investors to buy and sell debt issued on the mainland. In 2021, a southbound route was added, allowing mainland Chinese investors to buy bonds issued in Hong Kong.
On January 13, Pan unveiled additional enhancements to the southbound channel. Investors on the mainland can now buy bonds denominated in US dollars and euros using the connect programme. Beijing will also soon allow insurers and securities firms on the mainland to trade bonds in Hong Kong, which is currently restricted to banks.
Dennis Chow Chi-in, Deloitte’s Asia-Pacific chairman, said the changes would encourage more companies from Southeast Asia, India or Japan to raise funds in Hong Kong.
The more the number of bonds issued in different currencies in Hong Kong, the more interest these will attract from funds backed by international investors, Chow said, adding that this will enhance the city’s role as an international financial centre.
