Latest news with #SouthboundBondConnect
RTHK
5 days ago
- Business
- RTHK
Bond Connect tweaks enrich investment spectrum: expert
Bond Connect tweaks enrich investment spectrum: expert Currently, the Southbound Bond Connect has a daily investment quota of 20 billion yuan, and an annual limit of 500 billion yuan. File photo: RTHK A fixed-asset investment veteran said that the latest tweaks on the Bond Connect scheme enrich the investment spectrum for onshore investors, but called for the link's annual quota to be further increased to facilitate growing transaction volume. The comments came after a senior official from the People's Bank of China (PBoC) announced last week that the southbound leg of the bond trading link will be opened to non-banking players such as securities and wealth management firms to invest in offshore bonds. The move marked a significant step by Beijing to relax capital-flow restrictions, as previously only banks and qualified institutional investors were eligible. It also offered an opportunity for onshore investors looking for higher yields, according to Shen Li, Head of Foreign Exchange Sales, Asia Pacific at State Street Markets. "It all comes down to the fact that you can further diversify out of the onshore investment opportunities, as at the moment the bond yield onshore is still on the low end as officials want to keep the loose monetary policy to stipulate the local economy," he told RTHK. "Investors…generally invest in the China Government Bonds (CGBs) and Policy Bank debts, and the Non-convertible Debentures (NCDs). I think by opening up the southbound channel, it just opens up the spectrum for investors to choose from." While the policy bank bonds, similar to the CGBs, are issued by state-backed financial institutions to promote specific public policy objectives, NCDs are corporate bonds with fixed interest and tenures. Li added that the Bond Connect expansion, along with other planned relaxations including that on the Southbound repurchase agreement (repo), a short-term borrowing and lending transaction involving the sale of securities with a promise to repurchase them at a later date, as well as that on the Swap Connect programme, would also enrich the two-way gates for onshore and offshore investors to choose from. However, Li felt the southbound link's limits of 20 billion yuan each day, or 500 billion yuan annually should be adjusted accordingly, after they were unchanged since the scheme's inception in 2021. "The quota [of the scheme] matters because the [current] 500 billion yuan a year does provide a big cap on the investment opportunity," he explained. "At this moment, I don't think there's any official number being rolled out yet. However, such [an] expansion without an increase on the quota probably doesn't make sense."
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Nikkei Asia
08-07-2025
- Business
- Nikkei Asia
China's offshore bond trade opens up to non-bank financial entities
Bonds Southbound Bond Connect expansion follows easing yuan depreciation pressure China announces the easing of outbound capital controls at the Bond Connect Anniversary Summit in Hong Kong on Tuesday. (Lorretta Chen) LORRETTA CHEN HONG KONG -- China has expanded its Southbound Bond Connect program to allow a broader range of mainland financial institutions to invest in offshore bond markets via Hong Kong, further relaxing restrictions on outbound capital flows. The program, which enables mainland investors to buy and sell notes tradable in Hong Kong, now includes non-bank financial institutions such as securities firms, mutual funds, insurance companies and wealth managers, said Jiang Huifen, deputy director general at the People's Bank of China, during a forum in Hong Kong on Tuesday.
Business Times
08-07-2025
- Business
- Business Times
China mulls doubling Southbound Bond Connect to one trillion yuan
[HONG KONG] China is considering doubling an investment channel local investors use to buy bonds overseas, according to sources familiar with the matter, a major step in its efforts to loosen restrictions on financial flows. Regulators in the country have held early talks about expanding the so-called Southbound Bond Connect programme to as much as one trillion yuan (S$178 billion), said the sources, who asked not to be identified because the details are private. The expansion would be through an up to 500 billion yuan annual quota to non-bank financial institutions, which are currently left out of the trading link. Any such move would allow onshore firms to ramp up their exposure to international bonds that are tradeable through Hong Kong's stock exchange, including those denominated in US dollars. The country's biggest mutual funds would be among the firms eligible for the new quota, the sources said. No final decisions have been taken and any eventual plan would need approval from relevant regulators, the sources said. The proposal is the latest sign of Beijing's increasing determination to boost two-way flows in its financial market, something that may ultimately bolster the international appeal of the yuan. Chinese policymakers for years kept a tight grip on investments into and out of the country, wary of putting pressure on their currency. But as the US dollar has plummeted this year, they have seized their chance. The potential doubling of the southbound link comes after a flurry of moves including an expansion of a cross-border payment system, a broadening of the contracts foreigners can trade and a separate move to allow Chinese funds to invest more of their money overseas. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The People's Bank of China did not immediately respond to a request for comment. The Hong Kong Monetary Authority declined to comment. A Bond Connect anniversary summit will take place on Tuesday (Jul 8) in Hong Kong, though there is no indication that any announcements concerning the southbound programme would be made there. Currency ambitions Although any expanded southbound investment link would not directly spread the international use of the renminbi, it could help chip away at one of the main criticisms from yuan sceptics: that China's capital controls mean its market is effectively closed off to the world, limiting the appeal of its currency. If any expansion were to eventually go ahead, it could also spark stronger demand for offshore yuan-denominated bonds, giving a boost to the dim sum market. Chinese investors can get a big pick-up by putting their money into offshore yuan debt, where yields are frequently higher than the same issuers pay onshore. China's central bank governor Pan Gongsheng delivered a speech last month outlining what it would take to challenge the US dollar's place at the heart of the global trading system. He suggested a shift away from a global system reliant on the US dollar to one where several currencies play a big role. Foreign investors can buy onshore bonds through a similar northbound link, which is not subject to a quota. Bloomberg LP, the parent company of Bloomberg News, provides services related to Bond Connect. Investors already had a hint that such a move could be coming: In January, the People's Bank of China and the Hong Kong Monetary Authority tentatively agreed to expand the list of eligible investors for the southbound bond link, saying they wanted to include securities firms and insurers. Bond Connect operates in a closed-loop system, meaning investors are not permitted to buy bonds through the trading link and then use the proceeds from selling them to invest elsewhere outside mainland China. The annual quota for the southbound link has been unchanged at 500 billion yuan since it was launched in 2021. BLOOMBERG
Mint
07-07-2025
- Business
- Mint
China Considers Doubling Southbound Bond Connect to $139 Billion
China is considering doubling an investment channel local investors use to buy bonds overseas, according to people familiar with the matter, a major step in its efforts to loosen restrictions on financial flows. Regulators in the country have held early talks about expanding the so-called Southbound Bond Connect program to as much as 1 trillion yuan , said the people, who asked not to be identified because the details are private. The expansion would be through an up-to 500 billion yuan annual quota to non-bank financial institutions, which are currently left out of the trading link. Any such move would allow onshore firms to ramp up their exposure to international bonds that are tradeable through Hong Kong's stock exchange, including those denominated in dollars. The country's biggest mutual funds would be among the firms eligible for the new quota, the people said. No final decisions have been taken and any eventual plan would need approval from relevant regulators, the people said. The proposal is the latest sign of Beijing's increasing determination to boost two-way flows in its financial market, something that may ultimately bolster the international appeal of the yuan. Chinese policymakers for years kept a tight grip on investments into and out of the country, wary of putting pressure on their currency. But as the dollar has plummeted this year, they have seized their chance. The potential doubling of the southbound link comes after a flurry of moves including an expansion of a cross-border payment system, a broadening of the contracts foreigners can trade and a separate move to allow Chinese funds to invest more of their money overseas. The People's Bank of China didn't immediately respond to a request for comment. The Hong Kong Monetary Authority declined to comment. Although the expanded southbound investment link won't directly spread the international use of the renminbi, it helps chip away at one of the main criticisms from yuan skeptics: that China's capital controls mean its market is effectively closed-off to the world, limiting the appeal of its currency. The move could also spark stronger demand for offshore yuan-denominated bonds, giving a boost to the dim sum market. Chinese investors can get a big pick-up by putting their money into offshore yuan debt, where yields are frequently higher than the same issuers pay onshore. China's central bank governor Pan Gongsheng delivered a speech last month outlining what it would take to challenge the dollar's place at the heart of the global trading system. He suggested a shift away from a global system reliant on the dollar to one where several currencies play a big role. Foreign investors can buy onshore bonds through a similar northbound link, which isn't subject to a quota. Bloomberg LP, the parent company of Bloomberg News, provides services related to Bond Connect. Investors already had a hint that such a move could be coming: In January, the People's Bank of China and the Hong Kong Monetary Authority tentatively agreed to expand the list of eligible investors for the southbound bond link, saying they wanted to include securities firms and insurers. Bond Connect operates in a closed-loop system, meaning investors aren't permitted to buy bonds through the trading link and then use the proceeds from selling them to invest elsewhere outside mainland China. The annual quota for the southbound link has been unchanged at 500 billion yuan since it was launched in 2021. This article was generated from an automated news agency feed without modifications to text.
Bloomberg
07-07-2025
- Business
- Bloomberg
China Considers Doubling Southbound Bond Connect to $139 Billion
China is considering doubling an investment channel local investors use to buy bonds overseas, according to people familiar with the matter, a major step in its efforts to loosen restrictions on financial flows. Regulators in the country have held early talks about expanding the so-called Southbound Bond Connect program to as much as 1 trillion yuan ($139 billion), said the people, who asked not to be identified because the details are private. The expansion would be through an up-to 500 billion yuan annual quota to non-bank financial institutions, which are currently left out of the trading link.
