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Daniel Ren

Financial Secretary Paul Chan Mo-po hinted at the imminent launches of more connection links that will better connect Hong Kong’s financial markets with those on the mainland, as he pledged to offer global investors more risk-management tools.
Speaking on Thursday at the Bund Summit, a financial forum in Shanghai, Chan called on international investors who are eager to trade mainland bonds and equities to use Hong Kong as a pipeline.
“We will work to incorporate more risk management tools into the connect schemes to meet the needs of investors”, he said. “Hong Kong is the preferred conduit to access the mainland’s financial markets.”
Chan did not offer details on potential market liberalisations that would affect cross-border trading of stocks, bonds, exchange-traded funds (ETFs), as well as swap contracts.
But he stressed that Hong Kong’s role as a bridge between the mainland and global markets would get stronger because of the new plans for the connect schemes.
At present, Hong Kong and the mainland have links that allow for cross-border trade in stocks, bonds, ETFs, and interest swap contracts.
In addition, regulators in Beijing and Hong Kong have approved what is known as a dual-counter model, which enables investors to use offshore yuan funds to buy yuan-denominated shares that are listed on Hong Kong’s stock exchange.
Chan told the forum that the new model could reduce investor trading costs without incurring additional currency risks.
In July, regulators from Hong Kong and the mainland said global investors would be able to pledge their holdings of Chinese domestic bonds as margin collateral for northbound interest rate swap trading later this year.
Allowing the use of onshore bonds as collateral under the swap-connection scheme will improve the efficiency of capital management for foreign investors, and it will also make China’s onshore bonds more attractive, according to Julia Leung Fung-yee, CEO of the Securities and Futures Commission.
The connect scheme debuted in late 2014 when the Shanghai and Hong Kong stock exchanges started to cross-trade shares.
Yuan-denominated shares on the mainland are still – for the most part – off limits to overseas investors, except through the investment link with Hong Kong and via China’s qualified foreign institutional investor programme.
“Regulators are trying to restore the confidence of investors from both the mainland and Hong Kong following months of weak performance on both stock markets”, said Ding Haifeng, a consultant at Integrity, a Shanghai-based financial ­advisory firm. “For the mainland-based equity and bond markets, it is still important to draw more foreign capital to fuel trading to bolster liquidity.”
Hong Kong is now the largest offshore yuan trading hub in the world; 80 per cent of trade settlements that are denominated in the Chinese currency are processed in the city.
Chan said Hong Kong will strengthen yuan trading infrastructure, offer more yuan-denominated products and launch more risk-management tools so it will be easier for global investors to use the currency for trade and investment purposes.
“We will also continue to support the central, provincial and municipal authorities to issue renminbi-denominated bonds in Hong Kong,” he said.
The three-day Bund Summit, which began on Thursday, brought together senior policymakers, financial executives and academics from around the world to shed light on China’s economic status and prospects. The annual event is run by the China Finance 40 Forum, a non-governmental organisation.


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Hong Kong finance minister Paul Chan pledges more connection plans with mainland

Financial Secretary Paul Chan spoke to a forum in Shanghai on Thursday. Photo: Bund Summit 

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Minister hinted at the launches of more links that will better connect Hong Kong markets with those on the mainland


Minister hinted at the launches of more links that will better connect Hong Kong markets with those on the mainland.
