Hong Kong to cement its role as a yuan bond hub by appealing to more sovereign borrowersHong Kong is opening its arms to more sovereign debt issuers, as this week’s Apec Finance Ministerial Meeting (FMM) provides a good opportunity to demonstrate the depth and advantages of the city’s financial markets.Its signature dim sum bond market could leverage low fundraising costs relative to that of developed markets and risk diversification considerations to make the city a magnet for sovereign borrowers, including many members of the Asia-Pacific organisation, according to analysts.“Elevated US interest rates have increased the cost of dollar borrowing, making issuance in alternative currencies – including offshore renminbi – more attractive for many issuers, such as sovereign governments,” said Marcus Yin, assistant vice-president of the sovereign risk group at Moody’s, a credit rating agency.The yield to maturity for dim sum bonds, yuan-denominated bonds issued outside the mainland, is 2.01 per cent as of late September, according to FTSE Russell, while the yield to maturity for US Treasury bonds is roughly 5.1 per cent as of mid-October, according to the US Treasury Department.The finance ministers of Apec’s 21 member economies, which account for 62 per cent of global GDP, are expected to address debt issues and the mounting pressures of rising sovereign borrowing costs in their talks this week.Hong Kong’s Financial Secretary Paul Chan Mo-po, who highlighted the city’s unique role in debt financing for developing economies in his blog on Sunday, could step up lobbying during the ministerial talks.“As the world’s largest offshore renminbi centre, [Hong Kong] offers liquidity, settlement systems, market-making capacity and a specialised investor base that few competing financial centres can match,” Yin said.Mainland China and Indonesia have already turned to Hong Kong for dim sum bonds in the past. The Chinese Ministry of Finance issued a record 68 billion yuan (US$10.2 billion) in treasury bonds in Hong Kong in 2025 and is expected to reach 84 billion yuan this year.The Indonesian government issued its inaugural dim sum bonds in Hong Kong in 2025, totalling 6 billion yuan.Dim sum bond issuance is a key component mentioned in the Hong Kong government’s five-year plan. Yin said the city vowed to expand the supply of high-quality yuan-denominated assets and increase offshore yuan circulation.Hong Kong’s dim sum bond issuance reached 266.9 billion yuan as of late September, up 13.8 per cent year-on-year, according to HKEX data. The outstanding size is close to 1.9 trillion yuan, making it the world’s largest market.Agnes Tsang, partner at legal firm A&O Shearman, said the Southbound Bond Connect scheme, launched in 2021, allowed mainland institutional investors to invest in dim sum bonds, thereby “add[ing] access to a growing pool of mainland institutional investors alongside international demand”.Hong Kong also offers bonds in various currencies and digital green bonds that might attract Apec members’ interest.Malaysia, an Apec member, has listed Sukuk, also referred to as Islamic bonds, in Hong Kong in the past, most recently US$1.5 billion in July this year.Last month, Hong Kong broke global records by issuing digital green bonds worth around HK$20 billion (US$2.55 billion) in four currencies in September, the fourth in a series of issuances since 2023.Digital green bonds are digitally native debt securities used to finance environmentally sustainable projects.Tsang, who had advised the government since its first digital green bond issuance, highlighted “Hong Kong’s work on integrating different forms of digital money, including tokenised central bank money and tokenised deposits, in the primary issuance settlement process”.This “could position Hong Kong as a leading venue for sovereigns considering their first digital green bonds”, she added.https://www.scmp.com/business/banking-finance/article/3371334/hong-kong-cement-its-role-yuan-bond-hub-appealing-more-sovereign-borrowers?module=top_story&pgtype=section (ICE HONG KONG)

Fonte notizia: South China Morning Post