The first anniversary of the "Southbound Connect" of Bond Connect: The industry expects to further expand investment varieties and investors

　　Our reporter Liu Qi Meng Ke

　　After more than 4 years of stable operation of the "Northbound Connect" of Bond Connect, on September 24, 2021, the "Southbound Connect" of Bond Connect was officially launched, marking the two-way opening of Bond Connect and opening a new chapter in the opening of China's bond market to the outside world. .

　　Throughout the year from September 24 last year to the present, the hosting volume of "Southbound Link" has grown by leaps and bounds.

A reporter from Securities Daily reviewed the data released by the Shanghai Clearing House and learned that at the end of September last year, the number of "Southbound Connect" bonds under the custody of the financial infrastructure interconnection model was 35, and at the end of July this year, it had reached 339; From 5.525 billion yuan at the end of September last year, it has increased significantly to 224.11 billion yuan at the end of July this year.

　　Li Bing, president of Bloomberg Asia Pacific, said in an interview with a reporter from Securities Daily that since its opening one year ago, as an important part of the two-way opening of China's financial market, the "Southbound Link" is gradually playing an important role in providing domestic investors with The opportunity to diversify asset allocation to meet different risk preferences is also conducive to meeting the more diversified financing needs of the real economy, while injecting more vitality into the financial market of Hong Kong, China.

　　Domestic financial institutions

　　Improved investment and risk management capabilities

　　The "Southbound Connect" provides a channel for mainland institutional investors to invest in Hong Kong and the global bond market by strengthening the cooperation between the bond market basic service institutions of the two places.

　　Talking about the significance of "Southbound Link" in my country's capital market, Huang Kacheng, Managing Director of Invesco and Head of Fixed Income in Asia Pacific, said in an interview with a reporter from "Securities Daily" that it has "milestone significance".

So far, the mainland and Hong Kong bond market funds have achieved a complete closed loop of north-south exchanges and interconnection.

　　Huang Jiacheng believes that the "Southbound Link" allows domestic funds to flow out of the country in an orderly manner, which is conducive to a more balanced cross-border capital flow in the medium and long term; The channels for asset allocation in the financial market enable domestic investors to better diversify their investment portfolios; in addition, the launch of the “Southbound Connect” has also accelerated the development of Hong Kong’s bond market. The development of the market has a very positive meaning.

　　Zhang Jinqiu, Vice President of HSBC Bank (China) Co., Ltd. and Co-Director of the Capital Markets and Securities Services Department, told the Securities Daily reporter that the successful operation of the "Southbound Connect" has provided mainland investors with more opportunities to participate in the international financial market. Opportunities to further expand Hong Kong's offshore RMB capital pool and help consolidate Hong Kong's status as an international financial center.

At the same time, the management mechanism of "Southbound Link" has also proved to be an effective practice to steadily promote the two-way and orderly flow of domestic and foreign funds.

　　"We deeply feel that domestic financial institutions are also participating in overseas markets more comprehensively and deeply through the 'Southbound Link'. In the process, their investment and risk management capabilities have been improved, which is very important for the development of Chinese financial institutions. It's important," Li Bing said.

　　Custody quantity and balance

　　Significant increase since May

　　According to data from the Shanghai Clearing House, since May this year, the "Southbound Link" has ushered in a leap-forward growth.

At the end of May, the number of "Southbound Connect" bonds under custody was 178, with a custody balance of 87.89 billion yuan, a month-on-month increase of 196%; at the end of June, the number of bonds under custody further increased to 272, with a custody balance of 170.21 billion yuan, a month-on-month increase of 82.32 billion Yuan, the highest single-month growth since the opening of the "Southbound Link".

　　The latest data shows that at the end of July, the financial infrastructure interconnection model hosted 339 "Southbound Connect" bonds, with a balance of 224.11 billion yuan.

　　Li Bing believes that the custody volume of the "Southbound Link" has increased significantly, and the scope of investors participating in the "Southbound Link" transaction has also expanded. The reasons include the relatively high yield in the offshore market and the increase in the issuance of investable bonds.

　　While making achievements, "Southbound Link" also faces some difficulties and challenges in the development process.

"One of them is cross-border capital management." Huang Jiacheng said that the People's Bank of China is currently setting annual total quotas and daily quotas to avoid large-scale cross-border capital outflows.

However, as the "Southbound Link" gradually matures, the market is also discussing whether such a quota mechanism needs to be extended.

As the popularity gradually increases, investors' demand for the expansion of the "Southbound Link" may increase.

It is worth looking forward to how the People's Bank of China will adjust the quota mechanism of the "Southbound Link" and maintain the orderly flow of cross-border funds.

　　Huang Kacheng said that, in general, domestic investors' investment in overseas bonds is still at a relatively early stage. The better development of "Southbound Connect" cannot be separated from the further simplification of transaction registration procedures and the continuous improvement of market facilities. All these can help mainland investors to buy overseas bonds more easily.

　　"We also learned that investors are currently looking forward to further simplifying the investment transaction process, expanding the scope of investable products, and enriching the types of derivatives." Li Bing said.

　　Zhang Jinqiu said that he looked forward to further expanding the investment varieties and investor scope of the "Southbound Link" in the future, and the operating mechanism would be continuously improved.

This cross-border investment channel will interact and complement each other with other interconnection mechanisms, and jointly promote the high-level two-way opening of China's financial market.

(Securities Daily)