Government seeks to beef up Hong Kong’s role as Asia’s bond hub by accelerating Bond Connect, increasing use of green bonds
- In his latest budget, Financial Secretary Paul Chan Mo-po proposes doubling the ceiling on the sovereign green bond programme to HK$200 billion
- He also unveiled plans to expedite a cross-border investment channel that will enhance access to mainland China’s vast bond market
It forms part of the government’s drive to stimulate the city’s economy, which shrank 6.1 per cent last year, its biggest annual contraction on record, as the coronavirus pandemic brought activity to a halt and crippled businesses.
The government proposes doubling the borrowing ceiling of its green bond programme to HK$200 billion to allow it to issue a further HK$175.5 billion of the environmentally friendly bonds within the next five years.
Chan warned, however, that the plan to raise more funds this way will hinge on prevailing market conditions.
“We plan to issue green bonds regularly and expand the scale of the government green bond programme,” he said.
It comprises a 30-year tranche which is the longest tenor of any US dollar-denominated government bond in Asia to date. It was heavily oversubscribed, with the 30-year US$500 million tranche attracting more than seven times its issuance size.
Chan said on Wednesday the expansion of the green bond programme will enable the government to issue debt denominated in a wider range of currencies, and to finance a broader variety of projects. It also plans to issue green bonds for retail investors eventually, but offered no timetable for this.
The government also proposed raising the borrowing limit of its retail bond programme to HK$300 billion from HK$200 billion. These include retail bonds eligible for senior citizens, called Silver Bonds, and inflation-linked ones called iBonds.
The Hong Kong Monetary Authority and the People’s Bank of China have set up a working group to drive the southbound launch, which the Post has previously reported, “with the target of launching it within this year”, he said during his speech on Wednesday.
The Securities and Futures Commission (SFC) welcomed the proposed measures.
“The SFC looks forward to working closely with the government and regulatory counterparts to explore how Hong Kong can complement the mainland’s economic and financial development and how to further enhance Hong Kong’s competitiveness including formulating a roadmap for promoting the diversified development of the bond market,” said the watchdog’s chairman, Tim Lui.
Launched in 2017 as part of Beijing’s move to further open up its onshore bond market to foreign investors, the Bond Connect scheme is a joint venture that allows foreign investors easier access to the mainland’s vast onshore bond market through Hong Kong, via the so-called northbound channel.
So far, mainland investors have not been able to reciprocate and access the offshore bond market.
