Hong Kong Securities and Futures Commission Chairman Tim Lui: Promoting the normalization of government bond issuance and 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 that the government would promote the normalization of government bond issuance. At the same time, Hong Kong is exploring a phased introduction of central counterparty settlement for bond repurchase agreements and is constructing a dedicated settlement system. Liang pointed out how Hong Kong can deepen its connectivity with the mainland and international markets. First, there is a need to expand issuance in the primary market. Earlier, China's Ministry of Finance announced that it would issue a total of 84 billion yuan worth of national bonds in Hong Kong this year, a year-on-year increase of 24%, indicating strong momentum in Hong Kongs primary market. In the future, efforts will be made to normalize government bond issuance and promote it to the mainland, Southeast Asia, and the Middle East, aiming to gather regional bond issuers and global investors in Hong Kong. Secondly, it is essential to enhance liquidity in the secondary market, and promoting the development of the bond repurchase market is key to improving liquidity. To this end, Hong Kong is studying a phased introduction of central counterparty settlement for bond repurchase agreements and constructing a dedicated settlement system. This will effectively mitigate settlement and systemic risks. In addition, collateral arrangements are also crucial for releasing capital efficiency. Compared to major international markets, there is still room for Hong Kong to increase the proportion of non-cash collateral used as margin. Since last year, the Hong Kong Stock Exchange's clearing company has accepted national bonds and policy bank bonds held under the Bond Connect as collateral. As of the end of August, the RMB national bonds and policy bank bonds deposited by overseas investors accounted for 19% of their total margin collateral. This not only revitalizes funds but also expands the application scenarios of Chinese bonds. By the end of this year, the related collateral arrangements will extend to futures and options clearinghouses, further enhancing the global appeal of RMB assets. Under the promotion of the Hong Kong Securities and Futures Commission, the Hong Kong Stock Exchange (00388) has halved the fees for using non-cash collateral for margin financing to 0.25%. Subsequently, when the futures and options clearinghouse accepts national bonds as collateral, the Hong Kong Stock Exchange will consider further reducing the fees.