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Debt Market Industry in Hong Kong


  • Hong Kong is one of the most liberal debt markets in the world. International investors are free to invest in debt instruments issued in Hong Kong. There are no restrictions on foreign borrowers tapping the domestic debt market to finance their business.
  • Hong Kong has an active and liquid private-sector bond market. The size of the market, as measured by the outstanding amount of non-public Hong Kong dollar debt securities, was HK$559 billion (US$71.7 billion) as of end-2014, accounting for around 40% of the total outstanding Hong Kong dollar debt instruments.
  • The Hong Kong government continues to implement the Government Bond (GB) Program to promote the non-bank investor base in Hong Kong. An outstanding amount of HK$98 billion under the GB Program was recorded as of December 2014.
  • To enhance Hong Kong’s role as an Islamic Finance platform, the Hong Kong government has amended tax laws for preparing an inaugural sukuk issuance under the GB program with the issuance size ranging between US$500 million and US$1 billion.
  • The Hong Kong government has launched an inflation-linked bond issue programme called iBond, with the latest batch rolled out in August 2015 with an issuance size of HK$10 billion.
  • In 2014, issuance of RMB bonds in Hong Kong (Dim Sum Bonds) reached RMB197 billion, compared with that of RMB116.6 billion in 2013.

Industry Data

Table: Outstanding Amount of Hong Kong Dollar Debt Instruments
Table: Outstanding Amount of Hong Kong Dollar Debt Instruments

Hong Kong is developing into a multi-currency capital market and a major debt market. After the introduction of a US dollar Clearing System in August 2000, a second foreign currency clearing system Euro Clearing was implemented in April 2003, followed by the implementation of a full-fledged Renminbi RTGS system in June 2007.

Exchange Fund Bills and Notes (EFBNs) and eligible private debts are cleared through the Hong Kong Monetary Authority’s (HKMA) Central Moneymarkets Unit (CMU) to provide computerised clearing and settlement facilities. Hong Kong is among the pioneers in adopting a Real Time Gross Settlement (RTGS) system, which was introduced in December 1996, allowing both real time and end-of-day delivery versus payment service. To facilitate the issuance and trading of Renminbi (RMB) bonds in Hong Kong, the RTGS system and CMU were upgraded to handle the related settlements of RMB funds and trading of RMB bonds respectively in June 2007. In June 2012, HKMA established a CMU Central Bank Placement Coordinating Window, an issuance mechanism to expand the investment base to central banks and monetary authorities.

Most of the private sector bond trading occurs in the OTC market, although many debt instruments are also listed on the Hong Kong Exchange (HKEx). Several private sector financial institution groups have set up electronic bond trading platforms for institutional investors, and individual banks and brokerage houses have been providing on-line bond trading to their retail clients.

Industry Development and Market Outlook

  • Hong Kong's debt market is relatively small compared to its banking and equity markets. However, growth of the market has been very rapid and the outstanding amount of Hong Kong dollar debt securities had increased to 63% of GDP in 2014, compared with only 8% of GDP in 1994. Non-public segment of the outstanding amount accounted for some 25% of GDP during the same period.
  • The Government Bond Programme (GB Programme) was implemented in 2009, with the aim to enlarge the local bond market, allowing the Hong Kong government to issue official bonds up to HK$100 billion, with the HKMA helping to offer the bonds and implement the Programme. The size of the GB Programme was expanded to HK$200 billion in 2013.
  • In the Budget 2011-12, the government launched a new type of government bond (named iBond) under the GB Programme, which links its return to inflation. The iBond programme only accepts subscription from local residents. The latest batch of iBond was issued in August 2015 with an issuance size of HK$10 billion.
  • As of December 2014, HK$96.5 billion of bonds were outstanding under the GB Program, made up by HK$30 billion of retail bonds and HK$66.5 billion of institutional bonds.
  • To enhance Hong Kong’s role as an Islamic Finance platform, the amendment bills of Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) and Trust Law were passed in 2013. Further, the Loans (Amendment) Bill 2014 was passed in March 2014 to allow issuance of sukuk under the Government Bond Programme.
  • In September 2014, the Hong Kong government issued an inaugural sukuk under the GB programme with an issuance size of US$1 billion. This was the world’s first Islamic bond issued by an AAA-rate government. A series of investor meetings (Roadshows) regarding potential sukuk issuance have been arranged in Asia, the Middle East, Europe and the US starting since September 2014.

RMB bonds issued in Hong Kong

  • RMB bonds have recently emerged as a new driving force for the development of Hong Kong’s bond market, with a higher diversification in the instruments types issued. Three floating papers were issued in 2013. In January 2013, in addition to the fixed- rate issuance which was dominated in the past. HSBC issued RMB 1billion two- year floating rate RMB bond, marking the first issuance of floating- rate note since 2011. The floating paper was issued with an initial price fixed at the three-month Shanghai Interbank Offered Rate (SHIBOR)-60 basis points.
  • In November 2013, China Development Bank (CDB) issued RMB1.9 billion worth RMB floating- rate bond. In the same month, L- Bank, a German issuer, launched 250 million of RMB floating- rate bond, first in the world linked to the CNH (Chinese offshore Yuan) Hong Kong Interbank Offered Rate.
  • In support of the development of Hong Kong as an offshore RMB business centre, as well as opening up a new channel for financial intermediation between Hong Kong and the Mainland, China’s Ministry of Finance (MoF) launched its inaugural sale of sovereign RMB bonds of RMB 6 billion in Hong Kong in October 2009.
  • After issuing RMB14 billion of sovereign bonds in Hong Kong in May 2015, China’s MOF announced in mid-November 2015 to further issue RMB14 billion in Hong Kong, of which RMB12 billion would be issued to institutional investors, central banks and monetary authorities outside the Chinese mainland through a tendering mechanism of the HKMA, with the remaining RMB2 billion to Hong Kong residents through placing banks and the HKEx.
  • In 2014, issuance of RMB bonds in Hong Kong (Dim Sum Bonds) from more than 100 issuers reached RMB197 billion, compared with that of RMB116.6 billion in 2013.The outstanding Dim Sum Bonds issued in Hong Kong amounted to RMB381 billion as of end-2014.
  • The issuer base of Dim Sum Bonds became more diversified. According to Hong Kong Monetary Authority, for Dim Sum Bonds issues up to end-December 2014, mainland authority, banks and enterprises jointly issued 42% of the bonds, banks and enterprises from Hong Kong issued 19% of the bonds, while overseas corporations contributed the remaining share.
  • In addition, mainland non-finance-related enterprises were allowed to issue RMB bonds in Hong Kong in 2011. After the first issuance of such kind by Baosteel Group Limited in December 2011, the National Development and Reform Commission (NDRC) published a Circular on “the Matters relating to the Issuance of RMB Bonds in Hong Kong by Onshore Non-financial institutions” in May 2012, formalising the approval process for the Mainland non- financial institutions to issue RMB bonds in Hong Kong.
Content provided by Picture: Gary Ng
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