HSBC China has facilitated the first interest rate swap (IRS) trade by overseas institutional investor (OII) through the central counterparty clearing model in the China Interbank Market (CIBM).
The new channel allows HSBC international clients to tap into China’s bond market while also adding to their risk mitigation capabilities, HSBC revealed.
The bank has acted as the counterparty and bond settlement agent for the IRS conducted by the investment firm in Asia, Dymon Asia, and also on behalf of the funds it manages.
Sophia Chung, head of HSBC securities services in China, noted that the trade by Dymon Asia showcases that foreign investors are tapping deeper into the Chinese market and believes it could lead to more similar trades in future by investors to mitigate their investment risks.
“With the potential inclusion of Chinese bonds into more global indices, we expect the momentum of foreign entry to further continue and diversified derivatives will make it easier and safer for them to invest,” Chung explained.
Across China and Singapore, HSBC worked closely with Dymon Asia and ‘actively engaged’ regulators including Shanghai Clearing House (SCH) to design and implement the product through a new process.
According to HSBC, this allows OIIs to use the onshore interest rate derivatives for hedging purposes to enhance their portfolio and risk management.
Meanwhile, the bank of communications has provided clearing services to Dymon Asia as one of the central counterparty clearing members appointed by the clearing house.
According to HSBC Singapore’s CEO Tony Cripps, with its established ecosystem of issuers and market making capabilities, Singapore has grown to become a key asset management hub, connecting global investors to the region and facilitating financing opportunities in Asian investable asset classes.
“This trade sets the bar for an accelerated trend of foreign investors based in Singapore to tap the deep pool of opportunity in the Chinese bond market,” Cripps noted.
Mark Wong, COO of Dymon Asia, commented: “Dymon Asia is proud to be a part of a milestone – the first successful IRS trade under central counterparty clearing model by an OII in the CIBM. This reiterates our commitment and focus in the Asia region, giving us opportunities to further our growth as well as deepen our insights and participation in local onshore markets.”
“Through our continued efforts to facilitate the opening up of the bond market, and vis-à-vis our Dymon Asia China Absolute Return Bond Fund, Dymon Asia is pleased to be able to help overseas investors access the China bond market,” Shawn Yuan, CIO of Dymon Asia China Absolute Return Bond Fund, Dymon Asia, added.
