Hong Kong can become a multicurrency bond hub with Beijing’s support: experts 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. “Many Hong Kong public bodies have seen an increasing interest in multicurrency bonds from investors who are interested in investing in different currencies.” 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. Hong Kong had US$435 billion of outstanding bonds at the end of last year, according to Bloomberg data. Earlier this month, UBS was a joint global coordinator on a deal for Airport Authority Hong Kong to raise US$6.97 billion with tranches denominated in US dollars, yuan and Hong Kong dollars. “Previously, many companies or public bodies mainly issued [US dollar] bonds as that is the most liquid and established international bond market,” UBS’ Lee said “But in recent years, the Hong Kong dollar and yuan [have been] getting more popular.” In November, deposits of China’s currency reached about 1 trillion yuan (US$137.5 billion), which can support yuan bond investment, according to Lee. The Hong Kong dollar bond market is also developing well because of the increasing of local and Asian investors buying local currency bonds, he added. Last year, US$23.9 billion worth of public bonds were issued in Hong Kong. UBS data showed that 55 per cent of that was denominated in US dollars, followed by 27 per cent in Hong Kong dollars, 14 per cent in yuan, and 3.8 per cent in euros. In contrast, in 2020, the US$22.8 billion of public bonds issued in Hong Kong were all denominated in US dollars. According to UBS’ definition, public bonds are those sold to institutional investors via a book building process, excluding retail bonds or debt sold to institutional investors via private placements. “Many local companies are borrowing in Hong Kong dollars,” Lee said. “When the local bond markets have developed [sufficiently], it makes sense for them to issue bonds in Hong Kong dollars.” On Tuesday, Hong Kong and Macau linked their bond clearing systems, which will allow investors to trade debt in both markets. “The linkage will provide international investors, including those from Portuguese-speaking countries, with a convenient channel to participate in the bond markets of Macau and Hong Kong,” said Benjamin Chan Sau-san, chairman of the Monetary Authority of Macau. https://www.scmp.com/business/banking-finance/article/3295941/hong-kong-can-become-multicurrency-bond-hub-beijings-support-experts (ICE HONG KONG)

Fonte notizia: South China Morning Post