Mainland China and Hong Kong's "interchange" business announced in July last year is reported that it has been consulting the rules of transaction and is expected to land in the first quarter of this year.As the mainland China further expands the opening of the financial market, it facilitates the risk of management interest rates for overseas investors.
According to Bloomberg, people familiar with the matter revealed that in December last year, the Chinese regulatory authorities convened market institutions such as banks, securities firms to meet, and solicited opinions on exchanging transactions and liquidation rules, participating institutions and other related issues.According to the draft of the solicitation, the daily limit of the daily transaction in the early days of the north direction was 20 billion yuan (RMB, the same below, about S $ 4 billion).
People familiar with the matter also said that the project will be launched in the first quarter.
The Central Bank of China and the Hong Kong regulatory authorities announced in early July last year that with the deepening of the openness of the interbank bond market to the outside world, the demand for overseas investors in the management of RMB interest rate risk continued to increase, and Hong Kong and the mainland interest rate mutual interest rates will be carried out.Change the (IRS) market interconnection and cooperation, and the project is launched six months later.
The launch of swaps is expected to help overseas institutions brings risks brought about by hedging interest rate fluctuations, and further enhance its degree of participation in the domestic bond market.At the same time, it also helps enhance the liquidity of the inter -bank interest rate exchange market and help consolidate Hong Kong's international financial center status.
A spokesman for the Hong Kong Securities Regulatory Commission said in an email that as expected when the project was announced in July last year, the preparations must be six months or longer.The start -up startup will depend on regulatory approval and whether the market is ready.All relevant departments are closely cooperating to start the launch, including replacement systems, cooperation agreements, and revision of rules.
The information provided by the National Banking Interior Borrowing Center shows that in addition to international financial institutions and currency officials, only individual overseas institutions can directly participate in inter -bank interest rate exchange transactions.Foreign capital cannot directly participate in domestic government bond futures transactions. The lack of corresponding risk hedging tools have always been one of the concerns of foreign -funded allocation of shore bonds.
According to the regulations of the People's Bank of China, if overseas institutions are currently qualified to participate in the interest rate exchange market transactions, we must first sign the main agreement between the International Disposal and Derivation Tools Association (ISDA) and complete the system for record.For most overseas institutions, it is necessary to sign a derivative agreement with domestic and complete the difficulty of filing, and these institutions are the main transactions. At this stage, they can only hedge with non -delivery interest rate swap (NDIRS) in the offshore market.
The inter -bank market launched the RMB interest rate exchange in 2006.According to central bank data, the transaction scale in 2021 has reached 2.11 trillion yuan.
China announced in 2016 that eligible overseas institutions can invest in interbank bond markets.Since then, as the world's major bond indexes have included Chinese bonds, foreign capital has continued to increase its holdings. By the end of 2021, the size of the inter -bank market reached 4 trillion yuan, accounting for about 3.5%of the total number of custody in the market.However, due to the inverted and sharp depreciation of the yield of China -US bonds and the sharp depreciation of the RMB, foreign capital continued to flow out last year. The cumulative net reduction of its holdings throughout the year was about 610 billion yuan.
With the reappearance of Chinese bonds in December, the market is expected to return to the Chinese market in 2023.Barclays Bank analyst Ashish Agrawalt and Zhang Meng said in a report on Thursday that foreign capital may be attracted by the upward rate of Chinese bond yields in December, plus the requirements of index configuration and RMB appreciation factor; these inflows may slow down in January in January slowHowever, the inflow of funds may increase in 2023, preferred to investors or more favors Chinese Treasury bonds.
