What is Bond Connect?
Bond Connect is a new mutual market access scheme that allows investors from mainland China and overseas to trade in each other’s respective bond markets.
Northbound trading commenced on July 3 in the initial phase, allowing overseas investors from Hong Kong and other regions to invest in the China interbank bond market through mutual access arrangements in respect of trading, custody and settlement. There are no quota limits imposed on the northbound investment. Southbound trading will start at a later date.
What are the advantages of Bond Connect?
Under the Bond Connect programme foreign investors are able to buy debt trading on China’s interbank bond market directly through the Hong Kong exchange. Eligible investors are mainly institutions, such as banks, insurance companies, brokerages and asset management firms.
Prior to the Bond Connect, foreign investors needed to go through a lengthy process of opening an account, applying for yuan quotas and finding a clearing agent with international settlement.
China’s bond market is now valued at 65 trillion yuan (US$9.57 trillion) and foreign investors hold about 800 billion yuan, or 1.3 per cent of the total.