The ‘Southbound Join’ simply made it simpler for Chinese language traders to purchase abroad bonds
A brand new channel for mainland traders to buy abroad bonds opened on Friday, at the same time as uncertainty lingered over the destiny of closely indebted developer China Evergrande Group.
The Southbound Bond Join is an association that permits institutional traders in mainland China to put money into the Hong Kong bond market “by way of connection between the Mainland and Hong Kong monetary infrastructure providers establishments,” in line with the joint announcement by the Individuals’s Financial institution of China and the Hong Kong Financial Authority on Sept. 15.
HKMA Deputy Chief Govt Edmond Lau described the opening as a “main breakthrough” which completes the two-way opening of China’s bond market by way of Hong Kong.
“I feel the most important profit can be that it helps considerably enlarge the investor base of our Hong Kong bond market,” Lau informed CNBC’s Emily Tan.
“Mainland traders, they’ve very excessive financial savings price and so they have a must diversify their danger and asset portfolio and due to this fact, that is actually a very good direct and in addition handy channel for them to speculate into the offshore bond market by way of Hong Kong,” he stated.
The Southbound Bond Join is one in all a number of “join” packages that hyperlink the mainland markets with Hong Kong. Different related packages embody the Inventory Join, which permits traders within the mainland to commerce some shares in Hong Kong, whereas additionally permitting overseas traders to entry Shanghai and Shenzhen listed shares within the mainland.
The launch of the brand new bond funding channel for mainland traders comes as questions remain over debt-ridden Evergrande’s ability to pay off a massive interest on a dollar-denominated bond that was due Thursday.
Whereas a unit of the corporate dedicated to paying the curiosity on a mainland-traded bond earlier this week, Evergrande has to this point been silent on the $83 million greenback bond curiosity fee, with extra coupon funds due within the coming weeks.
Although no fee was made on Thursday, the corporate won’t technically default except it fails to make that fee inside 30 days.
“We can not touch upon the affairs of particular person firms, however what we will say is that the Hong Kong banking sector’s publicity to the high-leverage actual property builders on the mainland should not important,” Lau stated.
“We consider that any affect rising from a fallout of those firms are manageable in Hong Kong,” he stated.
— CNBC’s Emily Tan contributed to this report.