HSBC Launches Collaboration with Clearstream, Tapping into Chinese Bond Market

The partnership will look to tap into the worlds third largest bond market.

HSBC (NYSE:HSBC) has embarked on a strategic partnership with Clearstream, a provider of post-trade services for financial services participants, helping enable clients to access China’s Interbank Bond Market (CIBM), according to an HSBC statement.

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The Chinese bond market presently is the third largest in the world ($6.8 trillion as of Q2 2015). For its part, the CIBM scheme helps forge a new avenue for international investors to access onshore bonds, which complements existing QFII and RQFII schemes as well as those traded in Hong Kong.

The new partnership caters to customers of the international central securities depository (ICSD), with regard to improved and expanded access to CIBM. HSBC already has forged a niche as a key player in supporting multiple fixed income and bond capabilities for foreign and domestic investors in China. The lender also acts in the capacity of onshore bond settlement agent for Clearstream’s overseas institutional investor customers.

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Through this function, the group also helps provide trading execution, settlement and custody services in CIBM. The partnership is important as it will help institutional investors link into one of the world’s largest bond markets, thereby helping satisfy a demand in the region.

According to Philip Brown, Co-Chief Executive Officer of Clearstream Banking S.A., in a recent statement on the partnership: “We are delighted to partner with HSBC to become the first international central securities depository to offer global investors access to China’s Interbank Bond Market.”

Ian Banks
Ian Banks

“This development coincides with an important milestone, i.e. the inclusion of the RMB into IMF’s SDR currency basket, which is expected to boost investors’ demand for what is already the third largest bond market in the world. This also represents our focus on Asia and will enable us to offer our clients an attractive and efficient solution to build and further develop their exposure to China’s onshore bond market,” he added.

“A deep and liquid domestic bond market is a key stepping stone to achieving China’s ambition of making the RMB a truly global currency. Partnering with Clearstream places us in an excellent position to help foreign institutional investors tap into opportunities in the world’s third largest bond market, where approximately RMB54 trillion is currently traded interbank,” explained Ian Banks, Head of HSBC Securities Services for Asia-Pacific, in an accompanying statement.

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