A bond trading link to connect Hong Kong and mainland China will go live this year, according to the Chinese leadership.
The so-called Bond Connect has been discussed ever since the launch, in 2014, of the Stock Connect scheme, which connected the stock exchanges of Hong Kong and Shanghai. Stock Connect has since been extended to include Shenzhen.
Chinese premier Li Keqiang stated the plans at a press briefing in Beijing at the close of China's National People's Congress, its annual parliament.
Many investors are hoping Bond Connect prompts the compilers of major fixed income indices to include Chinese onshore bonds. Despite the opening of China's interbank bond market to a wide range of foreign institutional investors in February 2016, Chinese bonds are still excluded from most major global indices, which helps explain why allocations to Chinese fixed income from overseas investors is
low.
The Chinese authorities would like to welcome more international investment in onshore bonds, at a gradual pace, in the belief it would stabilise prices and add to a greater institutionalisation of the country's capital markets.
©2017 funds global asia