Post-trade services provider Clearstream has partnered with Citi to offer a cross-border bond trading and settlement scheme that allows overseas investors to access China’s $9 trillion bond market.
The new service secures greater access to the world’s second-largest economy and complements an existing Stock Connect offering for China A-shares where Citi acts as Clearstream’s local sub-custodian.
Earlier in May, the financial regulators in China and Hong Kong announced a joint initiative dubbed ‘Bond Connect’, which enables investors in Mainland China and overseas to trade bonds in each other’s markets through connection between their financial infrastructure institutions. The initial phase of the scheme – Northbound trading – went live in July to allow overseas investors to invest in the China Interbank Bond Market (CIBM).
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Orders in the so-called Bond Connect are placed through an electronic platform run by HKEX, and all transactions are settled through the Hong Kong Monetary Authority’s Central Money markets unit.
The joint venture follows the introduction of similar schemes that allow two-way trading between stock markets in Hong Kong and Shanghai and Shenzhen.
China is the world’s third-largest bond marketplace, with the yuan equivalent of $9.6 trillion outstanding, yet has minimal foreign investment due to difficulty of access.
Cindy Chen, Head of Securities Services at Citi Hong Kong, commented: “As the leading global bank on Bond Connect, Citi is pleased to partner with Clearstream to provide further ease of access to global investors and financial institutions to access the local China bond market.”
Philip Brown, Co-CEO of Clearstream Banking S.A., added: “China Bond Connect represents a major breakthrough in the opening of the Chinese capital markets, contributing to the growing international recognition of the important global role that the CIBM has assumed over the past years. Our cooperation with Citi allows foreign investors to profit from this development, making access to the CIBM as easy and efficient as possible.”