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HKEx considers extending Hong Kong-Shanghai stock connection into fixed income-CEO
May 22, 2014 / 7:30 AM / 4 years ago

HKEx considers extending Hong Kong-Shanghai stock connection into fixed income-CEO

HONG KONG, May 22 (Reuters) - A recently-announced scheme that allows Hong Kong and mainland investors to buy stocks in each other’s market could extend to fixed income and currency in the future, the chief executive of Hong Kong Stock Exchange said on Thursday.

Regulators in China and Hong Kong surprised market participants last month by unveiling a cross-border stock investment scheme, as part of steps to capitalise on the internationalisation of the Chinese currency.

The pilot project, to be launched after a preparation period of about six months, is the latest in a series of financial sector reforms that regulators have taken this year, such as widening the yuan’s trading band and increasing quotas for investors.

“Our overall strategy -- market mutual access -- applies to everything... Over time we’ll think whether or not Hong Kong-Shanghai Stock Connect gives us any imagination to potentially extend that into commodities and fixed income,” said Hong Kong Exchanges and Clearing chief Charles Li.

Li said there were three stages to develop the offshore yuan market. The first stage of building up infrastructure has been achieved in the past few years and market participants are now focusing on the second stage, which is product innovation.

“Ultimately when these products are built... we are thinking whether or not the significant need and the liquidity in China and international markets can also converge,” Li said.

The offshore yuan deposit pool globally has reached about 1.5 trillion yuan ($240.63 billion) and the $110 billion yuan dim sum bond market has been vibrant so far this year despite the currency’s volatility.

However, that is still a small amount compared with the $4.8 trillion onshore bond market.

Li said in April that the Hong Kong Stock Connect scheme could extend to commodity futures markets, but it would prove more challenging because there were fewer products, and that contracts were typically designed for risk management rather than purely as investment tools.

$1 = 6.2337 Chinese Yuan Reporting by Michelle Chen and Saikat Chatterjee; Editing by Kim Coghill

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