China allows investors to enter its markets

China will allow global investors awaiting the reopening of China’s economy to invest directly in a new strategic tool from Monday, the size of its market exceeding several trillion dollars.

Internal interest rate swaps with an annual turnover of $3 trillion last year, traded across the so-called “Swap Connect” programme between mainland China and Hong Kong, will be available to offshore funds with easy access to derivatives that will help hedge their exposure to the world’s second-largest bond market. The channel also enables them to bet on the key money market prices that are sensitive to China’s monetary policy, according to Bloomberg, and see it “in Arabic. net “.

The new program is kicking off as China’s sovereign bond market rises for nearly 7 consecutive weeks, with traders increasingly confident that the central bank will ease policy as the economic recovery falters. The tool also helps Beijing’s goal of opening up to more global investors after strict regulatory measures, while growing geopolitical tensions have raised concern about investing in the country even after COVID controls were repealed and its borders reopened.

For his part, the chief economist at Grow Investment Group, Hao Hong, in Shanghai, said: “Chinese authorities hope to attract global investors to the internal financial market, and Swap Connect is a step forward in this direction.” “Swap Connect alone may not be able to deter outflows in the short term, but we believe Chinese sovereign bonds will remain attractive to some foreign investors due to their safety and stability.”

China has set a daily net trading limit of 20 billion yuan ($2.9 billion) under the “Swap Connect” programme, and eligible tools include trade-offs indicating a fixed 7-day repo rate, and the Shanghai interbank rate on offer for 3 months and a full night. HSBC, Citigroup and J.P. Morgan are among 20 banks licensed to structure foreign money transactions via Hong Kong.