Hong Kong sets August debut for long-awaited offshore yuan bond futures
Beijing to strengthen the city’s status as a global hub for offshore yuan as it moves to internationalise the currency
Hong Kong is aiming for an August launch date to open the trading of Chinese treasury futures, a long-anticipated move as Beijing attempts to strengthen the city’s status as a global hub for the offshore yuan and internationalise its currency.
Trading for futures contracts on the five-year government bonds would commence on August 3 on the Hong Kong stock exchange, the Securities and Futures Commission (SFC) and Hong Kong Exchanges and Clearing (HKEX) said in separate statements on Thursday. Details pertaining to the derivative’s trading are still subject to SFC approval.
The bond derivative will broaden the range of yuan-denominated financial products available to overseas investors in the city, which is contending with stock market outflows due to limited exposure to the artificial intelligence supply chain. The launch would boost the appeal of offshore yuan assets by offering overseas investors more tools to hedge against financial market risks and protect their portfolios.
“The debut marks an important milestone in the development of Hong Kong’s fixed-income and currencies ecosystem,” said Carlson Tong, HKEX chairman. “We look forward to working closely with our partners and stakeholders to ensure the successful roll-out of this new risk-management tool and further enhance two-way capital flows between China and the world.”
The green light came just a day after China Securities Regulatory Commission chairman Wu Qing said at the annual Lujiazui Forum in Shanghai – a high-profile finance industry gathering – that the mainland’s regulator would support Hong Kong in introducing futures contracts on the five-year sovereign bond. The comment was widely interpreted as a sign that the launch was imminent.
Demand for yuan-denominated fixed-income assets has been rising as hostilities in the Middle East intensify and a record amount of US federal debt prompted global investors to diversify away from the US dollar. The yield on China’s benchmark 10-year government bond dropped close to a one-year low of about 1.7 per cent, while the yuan appreciated to its highest level against the US dollar in three years.