Hong Kong Securities and Futures Commission's Liang Chung-hsien: Promoting the normalization of government bond issuance, currently researching the phased introduction of central counterparty settlement for bond repurchase.

On September 9, during the keynote speech at the 4th HKEX China Opportunities Forum, Liang Zhongxian, Executive Director of the Market Surveillance Department of the Hong Kong Securities and Futures Commission, mentioned the push for the normalization of government bond issuance. He also noted that Hong Kong is exploring the phased introduction of central counterparty clearing for bond repurchase agreements and the construction of a dedicated clearing system. When discussing how Hong Kong can deepen its linkage with the mainland and international markets, Liang emphasized the need to first expand issuances in the primary market. The Chinese Ministry of Finance previously stated it would issue a total of 84 billion yuan in government bonds in Hong Kong this year, a year-on-year increase of 24%, indicating strong momentum in Hong Kong's primary market. In the future, there will be efforts to normalize government bond issuance and promote it in markets such as the mainland, Southeast Asia, and the Middle East, aiming to gather bond issuers from the Asia region and global investors in Hong Kong. Secondly, enhancing liquidity in the secondary market is crucial, and promoting the development of the bond repurchase market is key to achieving liquidity. To this end, Hong Kong is studying the phased introduction of central counterparty clearing for bond repurchase agreements and the construction of a dedicated clearing system. This will effectively alleviate settlement and systemic risks. In addition, collateral arrangements are also vital for releasing capital efficiency. Compared with major international markets, Hong Kong still has room to increase the proportion of non-cash collateral as margin. Since last year, the OTC clearing company under the Hong Kong Stock Exchange has accepted government bonds and policy bank bonds held under the Bond Connect as collateral. As of the end of August, the RMB government bonds and policy bank bonds deposited by overseas investors accounted for 19% of their total margin collateral. This not only activated funds but also expanded the application scenarios for Chinese bonds. By the end of this year, the relevant collateral arrangements will be extended to futures and options clearinghouses, further enhancing the global attractiveness of RMB assets. Under the initiative of the Hong Kong Securities and Futures Commission, the Hong Kong Stock Exchange (00388) has halved the fees for using non-cash collateral as margin financing to 0.25%. Soon, when the futures and options clearinghouses accept government bonds as collateral, the Hong Kong Stock Exchange will consider further lowering the fees.