Hong Kong: Bond Market Development Essay

Hong Kong: Bond Market Development Essay

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1. Evaluate the latest development of bond market in Hong Kong

The Hong Kong dollar debt market grew steadily despite the volatility in global bond markets.

Firstly, Hong Kong is quite a liberal debt market. According to CbondS, International investors are free to invest in debt instruments issued in Hong Kong. There are no restrictions on foreign borrowers tapping the domestic debt market to finance their business.

The bond market in Hong Kong has for some time been a significant market place for issuers and investors, in both domestic and foreign currencies. The range of product offerings, the open access for issuers and investors, both domestic and international, and the increasing significance of offshore RMB bond issuances make Hong Kong one of the most frequented international bond markets in Asia.

Secondly, amid uncertainties over the course of the Fed’s QE tapering and its potential impact on emerging markets, bond fund outflows and a surge in the yields of Exchange Fund Bills and Notes. In this situation, the public sector was the main driver of growth for the domestic debt market, issuing HK$274.5 billion or 14.5% more debt than the previous year.

New debt issued by the local private sector, which comprises AIs and local corporations, declined considerably. As the increase in public sector debt issuance more than offset the decline in new debt issued by the local private sector, total issuance in 2013 grew by 10.6% year on year to HK$2,356.8 billion.

The offshore renminbi debt market in Hong Kong also expanded tremendously in 2013. Apart from the strong growth and issuer mix, the market also saw two other positive developments, namely, the issuance of the first floating-rate bond priced with reference to the CNH...

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