Caixin
Dec 05, 2019 08:13 PM
DAILY CHART

Chart of the Day: Overseas Investors Trading More Chinese Bonds Through Connect Program Than Ever Before

The monthly transaction volume of a program that allows overseas investors to trade Chinese bonds through Hong Kong reached a record high in November, showing that offshore investors are taking advantage of China’s moves to further open up its financial markets.

Trading volume under the Bond Connect program reached 375.6 billion yuan ($53.2 billion) last month, up 8% from October and over fourfold year-on-year, according to data released last week by Bond Connect Co. Ltd., a joint venture set up by state-backed China Foreign Exchange Trade System and Hong Kong Exchanges and Clearing Ltd., the operator of the Hong Kong Stock Exchange.

A total of 154 new offshore institutional investors joined the Bond Connect program in November, more than in any previous month, the data shows. At the end of November, the program had a total of 1,533 institutional investors.

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The Bond Connect program, launched in 2017, has allowed offshore investors to trade and settle onshore Chinese bonds through a Hong Kong-based custodian and clearing service. The plan also aims to allow Chinese mainland investors to invest in Hong Kong’s bond market in the future.

The plan comes as part of Beijing’s efforts to rev up its massive bond market. China is the world’s second-largest bond market after the U.S., with nearly $13.7 trillion in outstanding debt securities at the end of March, according to data from the Bank for International Settlements, a global financial institution that serves as a sort of central bank for central banks.

Besides the Bond Connect program, overseas institutional investors currently have several other ways to invest in China’s bond market, including direct investment in the interbank bond market, as well as the Qualified Foreign Institutional Investor program and its sibling the RMB Qualified Foreign Institutional Investor program — widely known as QFII and RQFII.

In September, China’s central government approved a policy to remove the caps on how much overseas investors can invest in the country through both the QFII and RQFII programs, in a move to further open up the country’s financial markets.

Contact reporter Tang Ziyi (ziyitang@caixin.com)

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