Financial institutions including Citic Securities International Capital Management, GF Global Capital and Eastfort Asset Management were among the first investors to complete offshore yuan repo transactions using their onshore Chinese bonds under the northbound Bond Connect scheme, according to Standard Chartered, one of the programme’s 11 market makers in Hong Kong, cited by South China Morning Post.
The program would help clients “obtain yuan liquidity, effectively revitalize foreign investors’ onshore bond positions, improve capital efficiency, the attractiveness of yuan assets to international investors and further Hong Kong’s leading position as an offshore yuan business center”, said John Thang, the bank’s head of markets and strategic client management and solutions for Hong Kong, Greater China and North Asia.
“It is expected that the new repo arrangement will become a financial tool for investors to regularly manage yuan assets,” he said.
It is also set to unlock a range of financing and liquidity management solutions for offshore investors in the world’s second-largest fixed income market, according to William Shek, the head of markets and securities services for Hong Kong at HSBC Holdings.
“We view today’s debut as just the beginning of broader adoption of China bonds in offshore financing and collateral applications,” Shek said. The size of China’s bond market was US$23.5 trillion, behind US$56.2 trillion for the US, according to data from the Bank for International Settlements as of the second quarter of 2024.
HSBC said it acted as a liquidity provider and custodian bank for several global institutional investors on Monday, including Singapore-based hedge fund Dymon Asia Capital and Hong Kong-listed brokerage firm Guotai Junan International.