With Shenzhen link on back burner, HKEx homes in on China’s OTC market
China’s fixed-income and currency markets are a target for Hong Kong stock exchange operator
After extinguishing hope for a direct stock market link between Hong Kong and Shenzhen this year, Hong Kong Exchanges and Clearing (HKEx) is talking up a different target for netting China’s financial markets: fixed-income and currency markets.
“What we see as the biggest opportunity is where the liquidity is right now”, including foreign exchange derivatives and cross-currency swaps, Calvin Tai Chi Kin, head of global clearing at HKEx, said on the sidelines of a Euroclear conference in Hong Kong on Wednesday.
HKEx’s OTC Clear, a central counterparty for settling over-the-counter derivatives, plans to clear cross-currency swaps between offshore yuan and US dollars. The focus of the market would be on yuan and mainland counterparties, with the purpose of creating a level playing field for mainland banks in the market, Tai said.
What we see as the biggest opportunity is where the liquidity is right now
He also noted that, pending approval from regulators, OTC Clear would accept as collateral yuan-denominated offshore bonds issued by China’s Ministry of Finance.
The push into China’s fixed-income and currencies markets was in line with HKEx’s long-term strategy to replicate the Shanghai-Hong Kong Stock Connect, which launched a year ago, across multiple asset classes.
“Connecting with the mainland on that would be helpful but it’s too early for that now,” Tai said when asked if OTC Clear would link with a mainland exchange.
The South China Morning Post reported last month that talk on a China-Hong Kong Bond Connect scheme was eclipsing that on the linkage with the Shenzhen market.
