With the continuous acceleration of China's financial opening up, the pace of international investors entering the Chinese market is also accelerating, and the enthusiasm of foreign investors to increase their holdings of RMB assets continues to rise.
Relevant data show that as of the end of December 2021, overseas institutions held more than 4 trillion yuan of bonds in China's interbank market, and foreign investment increased by about 750 billion yuan in the whole year, with more than 1,000 international investors entering the market. On the other hand, the increasingly perfect issuance rules of China's bond market are also attracting global issuers to raise funds through the Chinese market.
In response, Cheng Zhuoxiong, Executive Vice President and Deputy Chief Executive Officer of HSBC Bank (China) Limited ("HSBC China"), said: "The favor of international investors and issuers for China's capital market is mainly due to the opportunities brought about by the long-term stability of China's economy and the opening up of financial markets. As China actively integrates into the global financial system, we believe that more high-quality investors and issuers will enter the Chinese market in the future. As an international financial institution that has been active in the forefront of China's financial opening-up, HSBC will continue to provide support for the opening up of China's financial market with its global network advantages and extensive customer base. ”
Cheng Zhuoxiong, Executive Vice President and Deputy Chief Executive Officer of HSBC China
Investors are enthusiastically entering the market
China's bond market continues to expand
The pace of opening up of China's bond market in recent years has been accelerating, and last year it pressed the acceleration button. In September last year, the Bond Connect "Southbound Connect" was officially launched; in October, China's government bonds were officially included in the FTSE Global Treasury Bond Index (WGBI), which has successfully ranked Chinese government bonds among the world's three major bond indexes; in the same month, the policy of exempting foreign institutional investors from corporate income from corporate income tax and value-added tax obtained from investment in the domestic bond market was extended to the end of 2025.
Zhang Jinqiu, Vice President of HSBC China and Co-Director of Global Capital Markets, said: "As the world's second largest bond market, the results of China's bond market reform and opening up are obvious to all. The successive implementation of various opening-up measures has further improved the infrastructure of the bond market, enhanced the liquidity of the bond market, and made foreign investors' confidence in investing in China's bond market increasing day by day. ”
Zhang Jinqiu, Vice President of HSBC China and Co-Director of Global Capital Markets
Despite the rapid growth rate, foreign capital currently accounts for about 3% to 5% of China's stock market and bond market, and there is still great potential for improvement in the future. Zhang Jinqiu said: "In the future, with the further development of the bond market, the enrichment of bond varieties and the continuous improvement of risk hedging mechanisms, we believe that there will be more inflows of overseas funds, especially long-term investment. This not only provides an opportunity for international investors to share in the dividends of China's economic development, but also helps to promote the further diversification of the investor structure of China's bond market. ”
Actively participate in the opening up of the bond market
Consecutively awarded "Excellent Market Maker of Bond Connect"
HSBC has been committed to actively introducing foreign investors to participate in the opening up of China's capital markets. At present, the total number of foreign institutional investors served by HSBC through the direct investment model in the interbank market occupies the largest number of all settlement agency banks.
On the first day of the launch of the Bond Connect Southbound Connect transaction last year, HSBC conducted the first transactions in Hong Kong and the Mainland as a market maker and a domestic institutional investor respectively, relying on its leading position in the financial markets of the two places and cross-border linkage advantages, helping Mainland investors diversify their investments and diversify their risks by investing in international bonds.
As early as July 2017, when bond connect northbound stock connect was launched, HSBC China became one of the first market makers to participate in the transaction, and has been actively performing its market maker duties since then, assisting foreign investors to participate in domestic interbank bond market transactions through bond connect. HSBC has been awarded "Bond Connect Outstanding Market Maker" for four consecutive years.
In addition to the connection between domestic and foreign markets, the trading methods, hedging tools and trading varieties of China's bond market are also becoming increasingly rich and perfect.
In September 2020, China's interbank bond market trial operation of direct investment mode of foreign investors direct transactions, which greatly improved transaction efficiency and reduced operational risks. HSBC was one of the first banks to participate in such business after the launch of the model, and as a market maker, it actively assists overseas institutions to carry out spot bond transactions through third-party platforms and participate in investing in China's bond market in a more efficient way.
Introduction of high-quality offshore issuers
Boost the high-quality development of the bond market
In addition to investors actively entering the market to share the dividends of China's economic growth, the high-level opening up of China's bond market has also attracted the participation of more overseas high-quality issuers.
Data from the China Interbank Market Dealers Association shows that in 2021, a total of 82.15 billion yuan of panda bonds registered with the Dealers Association were issued, an increase of 56% year-on-year.
In this regard, Cheng Zhuoxiong said: "In the past 2021, regulators have made a lot of important progress in promoting the improvement of the rules of the panda bond market, the expansion of market scale, product project innovation, and the expansion of investor groups, further enhancing the convenience of overseas issuers issuing panda bonds. With the close linkage of domestic and foreign teams, HSBC is committed to continuously introducing high-quality issuers and investors to China's bond market and contributing to the high-quality development of China's bond market. ”
As a leading international bank active in China's interbank bond market, HSBC China has been actively promoting the participation of overseas issuers and investors in the development of China's bond market. In 2017, HSBC China was approved to carry out the main underwriting business of panda bonds issued by overseas non-financial enterprises in the Chinese interbank market, becoming the first foreign bank to be qualified for this business.
In June last year, the BMW Group raised RMB3.5 billion in public bonds in China's interbank bond market, becoming the first European company to publicly issue bonds in the Chinese market. HSBC China acted as the joint lead underwriter and joint bookrunner in the short-term financing bond issuance of the transaction, and was the only foreign bank among the lead underwriters.
In April last year, the Asian Development Bank returned to the panda bond market after 12 years and successfully issued 2 billion yuan of panda bonds, which is also the largest Asian local currency loan in ADB's history. HSBC China acted as joint lead underwriter and joint bookrunner in this transaction.
At the same time, bonds from domestic issuers are also innovating, and the Export-Import Bank of China and the China Development Bank have restarted the issuance of US dollar bonds in the domestic market for several years and achieved a number of breakthroughs. As the main market maker of the interbank bond market and the primary trader of open market business, HSBC China successfully introduced high-quality investor orders in a number of bond issuances last year, promoting the success of the issuance.
Leading hosting services
Respond quickly to investor needs
Custody is one of the important links for foreign institutions to invest in the domestic bond and stock markets, and HSBC also maintains a leading position in providing custody services to foreign investors. According to the SFC's List of Qualified Foreign Investors ("QFIs") published at the end of December 2021, a total of 670 foreign institutions in the market have obtained QFI qualifications, and HSBC provides onshore custody services for 250 of them.
With the official opening of the Beijing Stock Exchange ("Beijing Stock Exchange") in November last year and the implementation of the supporting rules for foreign institutional investment in the Beijing Stock Exchange, foreign investors have set their sights on China, the newly established exchange.
HSBC quickly responded to the needs of foreign investors, working closely with institutions such as the Beijing Stock Exchange, China Securities Depository and Clearing Corporation and securities companies to complete the construction and testing of a number of business processes and systems. Earlier this year, HSBC China successfully assisted a QFI in completing its first stock transaction on the Beijing Stock Exchange, becoming the first foreign custodian bank to assist QFI in completing a transaction on the Beijing Stock Exchange.
The transaction is the second time that HSBC has assisted QFI in entering the new domestic securities investment business since the promulgation of the new QFI Regulations in September 2020, following the transfer of securities lending, private fund investment and margin business.
The continuous opening up of China's financial industry has provided a more transparent and convenient market environment for international financial institutions. In the future, with the further strengthening of the interconnection of domestic and foreign capital markets, HSBC will continue to participate in various financial reforms and capital market openings, providing momentum for the development of China's economy and financial markets.