HKEX, regulators target bond market for growth amid China demand

The Hong Kong Monetary Authority (HKMA) and Securities and Futures Commission (SFC) on Thursday issued a roadmap for the development of FIC markets, in a bid to promote the city as the regional hub for Chinese markets. The recommendations covered primary market issuance, secondary market liquidity, offshore renminbi markets and infrastructure upgrades.

“To position Hong Kong as a global FIC hub and further cement our position as the premier offshore RMB business centre, we will continue to build on our strengths, adapt to market changes and innovate, and capitalise on emerging trends, including RMB internationalisation and the digitalisation of the FIC market,” Eddie Yue, chief executive of HKMA ,said in a release.

“The Roadmap comprehensively set out our work focuses in the near future. We look forward to implementing the initiatives in collaboration with industry stakeholders.”

The move comes after a period of growth at HKEX this year, as shifting sentiment on China following US tariff announcements drove hedging volume. The exchange reported earlier this month a 21% year-on-year increase in daily volume in August, to a total 1.59 million contracts.

That included 109,470 contracts in its main offshore RMB (CNH)/US dollar future, according to FOW data, 7% higher than the same month in 2024. Speaking to FOW last week, HKEX head of markets Gregory Yu said the segment has seen increased interest from a wide range of market participants.

“We are the superconnector for China, so Renminbi has to be a prominent product on our shelf,” Yu said in an interview. “That is a hedging tool for corporates doing business in China, who can manage their exposure on exchange. Commodities firms who have been familiar with trading futures have been early adopters, but qualified domestic institutional investors have also been increasing international investment – and naturally have need for a corresponding hedge in local currency markets.”

The exchange has made strides in developing its fixed income business, with cash bond portal Bond Connect and over-the-counter (OTC) rates platform Swap Connect reporting higher volumes this year.

Bond Connect, which was launched in 2017, has seen activity rise to a record high of 45.9 billion RMB (£4.8bn) in the first half of this year – 3% higher than the same period in 2024, according to a results presentation. Swap Connect, launched in 2023, reached a record 21.9 billion RMB in the period, 72% up year-on-year.

“Over time, another key area for us to grow is the fixed income market – which will help diversify revenues and stabilise regional allocations and trading flows,” Yu added. “China’s fixed income market amounts to $24.6 trillion (£18.4tn), with only 1% offshore.

“There are definitely grounds for that to grow further to support the Renminbi internationalisation theme, supported by our existing Swap Connect and Bond Connect offerings.”

Speaking at the FOW Trading Asia event in Hong Kong last week, the SFC's executive director in charge of the markets division said the agency would consult on an expansion of transparency measures for listed derivatives.

HKEX added one-year loan prime rate (LPR 1Y) floating reference rate options to its Northbound Swap Comment programme this week.

Yu, who joined HKEX in March after 18 years at JP Morgan, said last month the firm is exploring market structure changes, including extending trading hours, reducing settlement cycles and revamping its data and analytics offering.