Central Bank Permits Irish Funds Invest Through Bond Connect

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Central Bank Permits Irish Funds Invest Through Bond Connect

March 25, 2019

The Irish funds industry association has announced that the Central Bank is to allow Irish funds, with immediate effect and subject to prescribed conditions, to avail of Bond Connect. Bond Connect is a mutual bond market access programme, established in July 2017 between Hong Kong and Mainland China, which allows international investors access the Mainland China Interbank Bond Market (CIBM).

Bond Connect, along with Stock Connect which links the Shanghai, Shenzhen and Hong Kong equity markets and which the Central Bank cleared Irish funds to access in July 2015, is part of the Hong Kong Exchanges and Clearing Limited’s (HKEX) ‘Mutual Market’ programme. Currently over 300 international institutional investors enter the CIBM through Bond Connect and on 22 February 2019, Bond Connect Company Limited, the joint venture of China Foreign Exchange Trade System and HKEX established to support Bond Connect related trading services, launched its Primary Market Information Platform. This is the first English-language portal for the dissemination of Chinese primary bond market information which “provides timely and reliable information on new Chinese bond issuances to global Bond Connect users”.

While there are certain differences between the programmes, Bond Connect, like Stock Connect, represents a straightforward and efficient market access alternative to the Qualified Foreign Institutional Investor (QFII) and Renminbi Qualified Foreign Institutional Investor (RQFII) regimes.

The Central Bank intends updating its UCITS and AIFMD Q&A documents to reflect the regulatory conditions attached to the use of Bond Connect. Similar to its Q&As on Stock Connect, the Central Bank expects the depositary of the fund to retain control over the bonds acquired through Bond Connect and, through continuous review, to ensure it meets its safe-keeping obligations on an ongoing basis.

The ability to efficiently access CIBM is a welcome development for Irish funds in view of the increasing recognition and importance of the Chinese bond market.