Hong Kong Securities Regulatory Commission Leung Chung-yin: Promoting the normalization of government bond issuance and studying the phased introduction of central counterparty settlement for bond repurchases

The Zhitong Finance App learned that on September 9, Leung Chung-yin, executive director of the Hong Kong Securities Regulatory Commission's Market Supervision Department, mentioned in his keynote speech at the 4th HKEX China Opportunity Forum that it will promote the normalization of government bond issuance. At the same time, Hong Kong is studying the phased introduction of central counterparty settlement for bond repurchases and the construction of an exclusive settlement system.

Leung Chung-yin pointed out how Hong Kong can deepen its linkage with mainland and international markets. First, it is necessary to expand the issuance of primary markets. Earlier, China's Ministry of Finance stated that it will issue RMB 84 billion worth of treasury bonds in Hong Kong this year, an increase of 24% year-on-year, indicating the strong momentum of the Hong Kong primary market. In the future, it will promote the normalization of government bond issuance and promote it to markets such as the Mainland, Southeast Asia and the Middle East, and strive to bring Asian bond issuers and global investors together in the Xiangjiang River.

Second, it is necessary to strengthen liquidity in the secondary market. Promoting the development of the bond repurchase market is the key to improving liquidity. To this end, Hong Kong is studying the phased introduction of central counterparty settlement for bond repurchases and the establishment of an exclusive settlement system. This will effectively mitigate settlement and systemic risks.

Furthermore, collateral arrangements are critical to unlocking capital efficiency. Benchmarking major international markets, Hong Kong still has room to increase the proportion of non-cash collateral as security deposit. Since last year, OTC clearing companies on the Hong Kong Stock Exchange have accepted treasury bonds and policy bank bonds held under Bond Connect as collateral. As of the end of August, RMB treasury bonds and policy bank bonds deposited by overseas investors accounted for 19% of their total margin collateral. This has not only revitalized capital, but also expanded the application scenarios for Chinese bonds. By the end of this year, relevant collateral arrangements will be extended to futures and options clearing houses, further enhancing the global appeal of RMB assets.

Under the impetus of the Hong Kong Securities Regulatory Commission, the Hong Kong Stock Exchange (00388) has cut the fee for non-cash collateral as a guarantee of financial access by half to 0.25%. Later, the Futures and Options Clearing House will accept treasury bonds as collateral, and the Hong Kong Stock Exchange will consider further lowering the fees.