Malaysia to benefit from China's bond market reforms, says HSBC

KUALA LUMPUR: Malaysia is ideally positioned to reap the benefit from China's financial reforms as it will allow more retail and foreign investors into the bond market, said HSBC Malaysia Chief Executive Officer Mukhtar Hussain.

He said the continued liberalisation of China's capital markets would offer Malaysian investors new investment avenues and diversified access to international assets.

"China's bond market has not traditionally enjoyed the same attention as its stock market, but these reforms make it clear that policymakers are committed to improve the efficiency of China's capital markets.

"This has also increased the importance of fixed income to the economy and financial system as a whole. Domestic retail investors and global investors alike should pay close attention," he said in a statement today.

On Feb 24, China announced that offshore commercial banks, insurance companies, securities companies, fund management companies and pension funds are now free to invest in the interbank bond market.

"It's now much easier for foreign investors to buy Chinese domestic bonds, as eventually they don't have to go through the existing Qualified Foreign Institutional Investor or Renminbi Qualified Foreign Institutional Investor quota system.

"Effectively, it is now easier to invest in the onshore market and this is most welcomed by foreign investors," Mukhtar said.

He added that by allowing more retail and foreign investors into the bond market, it would allow the market to become more liquid and improve the allocation of capital. 

"By expanding the foreign institutional investor base, China can enhance the mechanism for pricing credit risk. 

"It also helps the financial system to diversify risk and reduce its over-reliance on the banking sector," he said, adding that greater access to China's capital markets was also expected to spur greater use of the Renminbi in investments. - Bernama