Financial regulators in Hong Kong and on the mainland jointly announced on Monday that they are working to develop a new mutual market access programme that would enable offshore investors to execute interest rate derivatives transactions with onshore investors in the mainland.
In a joint statement, the Securities and Futures Commission, the People’s Bank of China and the Hong Kong Monetary Authority said the programme, Swap Connect, would be an effective way for offshore investors to manage interest rate risks arising from investments in the mainland bond market.
The SAR government welcomed the move. Chief Executive John Lee said the new programme marked another milestone in the integration of the mainland and Hong Kong financial markets.
"I am most grateful to the Central People's Government for announcing the initiative at the beginning of the new-term Government, which will bolster investors' confidence in our country's steadfast support to the development of Hong Kong as an international financial centre," Lee said.
"The implementation of the initiative will further support Hong Kong in strengthening its functions as a global offshore Renminbi (RMB) business hub and a risk management centre in response to the targets laid down in the National 14th Five-Year Plan, while contributing to the high-quality opening up of the Mainland capital market."
Financial Secretary Paul Chan said the Swap Connect will also be conducive to the development of Hong Kong's offshore RMB market, thereby further consolidating the SAR's status as an international financial centre and a global offshore RMB business hub.
"I would like to express my gratitude to the Central People's Government and relevant authorities for their strong support, and the institutions in the Mainland and Hong Kong for their efforts in taking forward the initiative," Chan said.
The launch of Swap Connect is subject to regulatory approvals, market readiness and the completion of operational arrangements.
Under the plan, northbound trading will be launched first in the initial phase, allowing Hong Kong and other overseas investors to participate in the mainland's interbank derivatives market between specified institutions in Hong Kong and the mainland.
Southbound trading, meanwhile, will be explored in due course.
The Hong Kong Monetary Authority said relevant infrastructure institutions in Hong Kong and the mainland will actively take forward the development work, with a view to launching the Swap Connect in six months.