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Monday, Apr 22, 2024

HKEX launches China-Hong Kong Swap Connect to help offshore bond investors hedge

HKEX launches China-Hong Kong Swap Connect to help offshore bond investors hedge

Hong Kong Exchanges & Clearing Ltd (HKEX) added a new Connect scheme linking markets in the financial hub with the mainland on Monday, by expanding into onshore interest rate derivatives to help offshore investors in Chinese bonds hedge their exposure.
The interest rate Swap Connect scheme would further promote the yuan currency's global status, HKEX CEO Nicolas Aguzin said.

Aside from helping offshore investors to manage interest rate risk and lower financing costs, the new scheme would improve efficiency of clearing and capital usage, said Haifeng Xu, deputy chief executive at Bank of China (Hong Kong) Ltd.

Xu added that in recent years mainland China and Hong Kong regulators were continuously optimising Connect schemes, expanding channels for offshore investors to invest and finance in onshore markets, making the processes more convenient.

The new scheme set the initial net daily trading quota for North Bound Connect at 20 billion yuan ($2.89 billion), and the quota may be adjusted based on market conditions in future, according to earlier statements.

Swap Connect was first announced by regulators last July 2022 and was initially supposed to be launched six months after that.

Jizhi Zeng, head of financial markets at Standard Chartered Hong Kong and the Greater Bay Area, said Swap Connect was another milestone connecting capital markets in Hong Kong and mainland, and would help to create synergies with the Bond Connect scheme.
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