Standard Chartered in First Foreign Trade of China Bond Futures

The Standard Chartered bank logo is seen at its main branch in Hong Kong in this Reuters file photo from August 2017.

Standard Chartered Bank says its branch in China has become the first foreign bank to trade treasury bond futures in the country.

The move comes as China works to both deregulate its markets and attract global investors – after months of foreign money flowing out of its $20-trillion bond market.

In a statement on Wednesday, Standard Chartered Bank (China) said it had completed its first treasury bond futures transaction in China, with the permission of regulators.

Treasury bond futures are a key tool to manage interest rate risks, and China’s opening-up of the market will allow foreign investors to better participate in its onshore bond market and promote yuan internationalisation, the bank said.

“We believe that the depth and breadth of global investors’ participation in China’s capital market will continue to increase” as more comprehensive risk management tools become available, its Asia chief executive officer Benjamin Hung said.

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Foreign Outflow Tops $107bn

Overseas institutional investors had dumped a net 740 billion yuan ($107.5 billion) worth of Chinese bonds during a 10-month streak of outflows, amid geopolitical tensions, worries about China’s economy, and US interest rate premiums over China.

Foreign holdings of yuan-denominated bonds traded on China’s interbank market stood at 3.33 trillion yuan at end-November, less than 3% of the total market size.

Standard Chartered’s bond futures trading comes nearly three years after China in early 2020 freed up banks and insurers to participate in the market for the first time, selecting its top five banks for an initial pilot scheme.

“China’s unwavering efforts towards expanding its opening-up, especially the continuous opening-up of the financial markets at a high standard, provides tremendous opportunities for Standard Chartered,” Jerry Zhang, vice chairman of the China unit, said.

In February 2022, Standard Chartered said it would invest $300 million in China-related businesses over the next three years and double the relevant profit contribution by end-2024.