Hong Kong unveils Southbound Bond Connect start date, first platform for offshore investors

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Hong Kong unveils Southbound Bond Connect start date, first platform for offshore investors

The Hong Kong Monetary Authority (HKMA) and the People's Bank of China (PBoC) have officially announced that Southbound trading under the cross-border Bond Connect will start on Friday 24 September.

The aim is to provide mainland institutional investors with a convenient and secure channel to invest in the Hong Kong bond market via connections between mainland and Hong Kong financial institutions, HKMA said in the statement yesterday (15 September). 

To date, 2,733 global institutional investors have been approved to use the northbound Bond Connect to access China's $17.5trn bond market.

The launch of southbound trading marks another milestone of mutual access between Hong Kong and mainland capital markets."

The southbound Bond Connect is expected to start with investments in offshore yuan-denominated debt, known as dim sum bonds.

International Investment reported on 10 September that the long-awaited cross-border investment schemes linking Guangdong province with Hong Kong and Macau would be launched, and also highlighted separate news of a half million Hong Kong passport surge to the UK.

Eddie Yue, the HKMA's chief executive officer, said: "The launch of southbound trading marks another milestone of mutual access between Hong Kong and mainland capital markets.

"Northbound trading has been operating smoothly since its launch more than four years ago, and has been well received by international investors who trade mainland bonds through Hong Kong."

Yue added: "The HKMA has maintained a close dialogue with the PBoC over the past few months on the policy framework of southbound trading. Southbound trading will deepen the two-way opening up of the mainland financial markets and promote the vibrant development of the Hong Kong bond market, thereby consolidating the city's status as an international financial centre."

The HKMA and the PBoC said they have agreed on the principles of cross-boundary supervisory cooperation under Southbound Trading and have signed an amended version of "Memorandum of Understanding between the People's Bank of China and Hong Kong Monetary Authority on Strengthening Supervisory Cooperation under Bond Connect".

In a separate statement, Tradeweb Markets Inc. (Nasdaq: TW), a global operator of electronic marketplaces for rates, credit, equities and money markets, yesterday announced it will expand its trading link with CFETS under the Bond Connect channel on September 24 to allow mainland China onshore institutions to invest in Hong Kong's fixed income markets.

Tradeweb said it was the first platform to enable offshore investors to buy and sell Chinese onshore bonds via its fully electronic request-for-quote (RFQ) trading link to Northbound Bond Connect.

More than $900bn in CNY cash bonds trades has been done via Tradeweb since the launch of Bond Connect in July 2017.

Last year, Tradeweb partnered with the China Foreign Exchange Trade System (CFETS) to deliver the first fully electronic RFQ access to China Interbank Bond Market (CIBM) Direct, another popular route for overseas investors connecting to and trading in the Chinese onshore bond market.

Lee Olesky, CEO of Tradeweb Markets, said: "After being selected as the first platform to link to Bond Connect and China's $15 trillion onshore bond market, we are honored to be chosen again as a launch partner for Southbound trading.

This latest milestone is the result of Tradeweb's close collaboration with CFETS to create access channels that help open up China's financial markets.

Tradeweb is at the forefront of digitizing and modernizing fixed income trading, so we look forward to working collaboratively with local participants to improve their access to liquidity and workflow efficiency in these markets."

Yi Zhang, president of CFETS, said: "We are pleased to be partnering again with Tradeweb to achieve Bond Connect's fundamental objective to serve as a mutual access pathway for fixed income investors in mainland China and overseas. The success of Northbound trading is proof that electronic execution is the way forward for bond market participants, and we are excited to see how it can further enhance onshore investors' Southbound trading experience."

James Sun, Tradeweb's head of Asia, added: "The launch of Southbound trading is a significant development for Bond Connect and the result of many years of meticulous planning and hard work from CFETS and Tradeweb in China. Our teams in Shanghai and Hong Kong continue to work closely with investors and liquidity providers to ensure the success of the new trading channel, and we look forward to collaborating with them further to streamline onshore investors' access to the international fixed income markets."