Hong Kong’s bond market is one of the
largest in Asia. Both issuers and investors from China and the rest of the
world have participated in this market across domestic and foreign currencies.
The bond market is also known for the offshore Renminbi bond issuances, also
known as Dim Sum Bonds. The government has also taken a step in the green bond
space since 2018 under the Government Green Bond Programme to showcase their
support for sustainable development alongside contribution towards the
climate and to promote the development of green issuance.
In 2019, Hong Kong dollar debt
issuance totalled HK$4.18tn which was 2% higher than that in 2018. The Hong
Kong Monetary Authority (HKMA) reported that HK$ issuance increased for a
eleventh consecutive year last year, primarily driven by Exchange Fund Bills
and Notes (EFBN) at HK$3.39tn. The overall outstanding size of Hong Kong dollar
debt instruments were at HK$2.17tn.
In May 2019, the Government of the
Hong Kong Special Administrative Region (HKSAR) of the People’s Republic of
China offered its maiden green bond under the Government Green Bond Programme,
with an issuance size of $1bn and a 5 year maturity. Additionally, two Sukuks
issued under the Government Bond Programme were outstanding, each with an
issuance size of $1bn. Overall, bond issuance by foreign issuers reduced in
2019 mainly owing to financial institutions and corporates. Local currency
bonds outstanding across central banks, corporates and the government almost
totalled to nearly $300bn in the quarter ending March 2020. The total value of
outstanding Hong Kong dollar debt instruments remained stable over 12 months
prior to March 2020.
Dim Sum bonds, termed after the
popular delicacy are quite popularly known in the bond markets of Hong Kong
with China Development Bank issuing the first Dim Sum bond in Hong Kong SAR in
2007 post which the Ministry of Finance in China issued RMB 6bn of Treasury Dim
Sum bonds. While the Hong Kong bond market is well known for Dim Sum bond issuances
which have picked up since debut, compared to the total Renminbi liquidity pool
in Hong Kong, the outstanding size of Dim Sum bonds are quite small – around
0.9% of offshore renminbi deposits as of March 2018 going by the IMF’s
analysis.
Most of the bond trading happens
in the Over-the-counter (OTC) markets. Some bonds may be listed and traded on
the Stock Exchange of Hong Kong Limited (SEHK), which is a wholly-owned
subsidiary Hong Kong Exchanges and Clearing Limited (HKEX).
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