On May 15th, the transactions under the "Northbound Swap Connect" officially opened. Experts believe that the launch of the "northward swap link" has enriched the risk hedging tools of foreign investors and will attract more foreign funds into China's bond market. According to the previous announcement of the People's Bank of China, the initial tradable variety of the "Northbound Swap" was interest rate swap products, and the quotation, trading, and settlement currency was RMB. In the initial stage, all foreign investors engaged in interest rate swap transactions through the "Northbound Swap Connect", and the net nominal principal amount after netting did not exceed RMB 20 billion per day. Bloomberg Asia Pacific President Li Bing told reporters that as global investors participate in the Chinese financial market through various channels, they have been looking forward to more investment tools to hedge risks and diversify their investment portfolios. Swap Connect "is another important milestone in the development process of China's financial market, which will unleash the potential of foreign investors to participate in the domestic derivatives market. This new connectivity mechanism further highlights the unique importance of Hong Kong as an international financial center in the global financial ecosystem. In recent years, China's interbank bond market has been continuously opening up to the outside world. Since 2017, the launch of the "Bond Connect" north-south link has become an important milestone in the opening up of China's financial market. As the world's second largest bond market, China's attractiveness globally is also steadily increasing. As overseas investors expand their bond holdings and increase their trading activity, their demand for using derivatives to manage interest rate risk continues to increase. From the perspective of the interbank derivatives market, since its launch in 2006, RMB interest rate swaps have been the main product, and after years of steady and healthy development, the trading scale has gradually expanded, the participants have become increasingly diverse, and the risk management function has been effectively played. Pang Ming, Chief Economist and Research Director of Jones Lang LaSalle in Greater China, told reporters that standardizing the development of the "Northbound Swap Connect" related business in the mainland and Hong Kong interest rate swap market has further improved the convenience for foreign investors to participate in the domestic RMB interest rate swap market, while coordinating development and security, protecting the legitimate rights and interests of investors, and maintaining normal market order The satisfaction of investors' demand for RMB interest rate risk management and asset allocation, as well as the strength of cross-border regulatory cooperation. "In recent years, the continuous opening of China's bond market has attracted many foreign investors, and the scale of foreign holding of China's bonds has continued to expand. With the increasing demand of foreign investors for effective interest rate risk hedging tools, the launch of the 'swap link' is just in time." Zhang Jinqiu, vice president of HSBC (China) Co., Ltd. and co director of the Capital Market and Securities Services Department, told reporters that in the future, With the development of "swap links", China's bond market will further integrate with the international market and attract more foreign capital inflows. This not only enables international investors to optimize asset allocation by investing in China's bond market, but also helps to further diversify the investor structure of China's bond market. (New News Agency)
Edit：Hou Wenzhe Responsible editor：WeiZe
Source：Securities Dairy
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