Monday 23rd October, 2017
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China's $9trn bond market opens up to foreign investors

China's $9trn bond market opens up to foreign investors

A long-awaited scheme enabling foreign in­vestors to buy and sell Chinese bonds has been launched.
 
The Bond Connect pro­gramme is Beijing’s latest at­tempt to open up its financial markets and attract foreign capital.
 
China’s $9 trillion bond market is the third-largest in the world, but only 2% of Chi­nese bonds are foreign-owned.
 
The launch has been timed to coincide with the 20th an­niversary of Hong Kong’s handover to Chinese rule.
 
Bonds are glorified IOUs, typically sold by governments and companies to raise cash.
 
Their attraction to investors is that they usually offer a fixed rate of interest and come with the promise of eventual full re­payment when the bond ex­pires.
 
Initially, Chinese bonds can be bought by banks, insurers and fund managers via Hong Kong.
 
No date has been set for Chinese investment in for­eign bonds.
 
HSBC Holdings and an as­set management unit of Bank of China became the first in­stitutions to trade using the scheme, with about $300m worth of bonds purchased in early trading.
 
Buying Chinese bonds - es­sentially Chinese government and corporate debt - will give investors greater access to in­vestments denominated in the Chinese currency, the yuan or renminbi.
 
Overseas investors have in the past been cautious about entering the market - partly over the stability of the Chi­nese currency as well as Bei­jing’s perceived lack of ur­gency to reform its financial markets.
 
There has also been long-held concern about the cred­ibility of credit ratings for bonds in China.
 
Similar systems to enable dealing in Chinese shares have been rolled out recently.

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