HSBC has completed what is says is the first third-party onshore renminbi foreign currency (CNY FX) trade under the northbound Bond Connect scheme. This was enabled by the enhancement framework issued by the Hong Kong Monetary Authority on March 5 2021 which provides investors with flexibility to engage more than one bank to conduct relevant currency conversion and foreign currency hedging.

Bond Connect has become a popular channel for international investors to access mainland China’s bond market. The enhancement is an important step to provide greater convenience and options for participating investors. It is also a key criteria set out by FTSE Russell for the final confirmation of the inclusion of Chinese government bonds into the World Government Bond Index from end-October 2021.

The third-party CNY FX trade was settled for a Hong Kong-based institutional client who has been investing in mainland China bonds and conducting CNY FX to hedge currency exposure with its local custodian. HSBC worked closely with the client and its local custodian from regulatory application to settlement coordination to deliver the desired outcome.

Justin Chan, the bank’s head of Greater China, global markets, Asia-Pacific, says: “HSBC is pleased to have executed the first third-party CNY FX trade under Northbound Bond Connect. This is a beneficial change for global investors as they can now use alternate banks to get competitive prices for their trades. We will continue to enhance our solutions to facilitate the accelerating demand from global investors on their investment in the mainland China capital markets.”

To support the rollout of third-party CNY FX trade under Bond Connect, HSBC has organized investor education seminars and one-on-one discussions with clients to drive awareness and understanding of the changes.