On Monday, China launched its Bond Connect program, which will allow foreign fund managers to trade in China’s debt markets. According to the Wall Street Journal, the trading volume is estimated at $9 trillion.
Thus, China is fulfilling its promises to liberalize and strengthen its domestic capital market. The launch of trades coincided with the 20th anniversary of Hong Kong’s return to Chinese control.
The program was approved by the People’s Bank of China in May in addition to earlier launched stock trading link between Hong Kong, Shanghai and Shenzhen. Only a "northbound" flow is operating at the moment. Now foreign investors can buy and sell Chinese bonds without having to set up onshore accounts.
Today’s trades were highly volatile with 2 billion yuan ($295 million) worth of bonds purchased in the first 22 minutes of trade.
HSBC Holdings, BNP Paribas, Citigroup, Standard Chartered and an asset management unit of Bank of China became the first institutions to trade using the scheme.
China’s government approved 20 market makers for the Bond Connect scheme, including 14 Chinese and six foreign institutions.
