Southbound trading under Bond Connect, a cross-border bond trading and settlement scheme linking Mainland China and Hong Kong, will commence on September 24. Northbound Trading under Bond Connect was launched in July 2017. Southbound Trading will allow Mainland investors to invest in Hong Kong’s bond market through connection between the financial infrastructure services institutions of the two places.
Hong Kong Financial Secretary Paul Chan said: “Hong Kong has been striving to deepen the mutual market access with the Mainland to further strengthen our role in connecting the financial markets in the Mainland and the rest of the world. The launch of Southbound Trading under Bond Connect will expand the product suite of the Connect family. It provides an effective channel for qualified onshore investors to make diversified asset allocation, and at the same time presents enormous opportunities for Hong Kong’s financial industry. The launch of Southbound Trading will further underline the unique function of Hong Kong in connecting Mainland capital and the wide range of products in the international market. Not only would this enhance the attractiveness of Hong Kong as a bond issuing platform and the liquidity of the bond market in Hong Kong, but also further facilitate the progress of Renminbi internationalization. “
Ahead of the launch of Southbound Bond Connect, the Hong Kong Monetary Authority (HKMA) announced it had designated the following 13 financial institutions as market makers for the scheme:
- Agricultural Bank of China, Hong Kong Branch
- Bank of China (Hong Kong)
- Bank of Communications Co., Hong Kong Branch
- BNP Paribas, Hong Kong Branch
- China CITIC Bank International
- China Construction Bank (Asia) Corporation
- Citigroup Global Markets Asia
- Credit Agricole Corporate and Investment Bank
- Hongkong and Shanghai Banking Corporation
- Industrial and Commercial Bank of China (Asia)
- J.P. Morgan Securities (Asia Pacific)
- Mizuho Securities Asia
- Standard Chartered Bank (Hong Kong)
These market makers were selected following an HKMA internal evaluation process based on several criteria, including certain basic conditions such as licenses for carrying on relevant activities, adequate internal control systems, and regulatory compliance; and other factors including the financial institutions’ activities in the Hong Kong bond market, their business presence in Hong Kong, counterparty network with Mainland financial institutions, etc.
The HKMA will review the list of Southbound Trading designated market makers and evaluate the need for enhancement and expansion as and when appropriate.