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Euromoney, August 2017

We don’t want to be churlish about an important landmark in the opening of China’s capital markets, but we keep hearing people talk about Bond Connect as a fixed income equivalent of Stock Connect. It isn’t, quite, and the market would do well to understand the nuances.

Clearly, both programmes exist to provide ease of access and reduce frictional costs for mainland Chinese assets and international investors through Hong Kong. It is also true that both will ease the inclusion of these domestic securities into international benchmarks, as is already happening with A-shares being added (in modest form initially) to key MSCI indices.

But let’s focus for a moment on the key differences. The most obvious is that retail can’t play in Bond Connect; whereas they have jumped on the opportunity to access Shanghai and Shenzhen stocks through Stock Connect, Bond Connect is institutional only for the foreseeable future.

Also, this channel is northbound only: it is not a loop like Stock Connect. The opening of the southbound channel will depend very much on China’s attitude to capital flight, which it has been trying to moderate for the last 12 months.

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Chris Wright
Chris Wright
Chris is a journalist specialising in business and financial journalism across Asia, Australia and the Middle East. He is Asia editor for Euromoney magazine and has written for publications including the Financial Times, Institutional Investor, Forbes, Asiamoney, the Australian Financial Review, Discovery Channel Magazine, Qantas: The Australian Way and BRW. He is the author of No More Worlds to Conquer, published by HarperCollins.

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