China capital markets - HSBC › - › media › gbm › insights › ... · China capital markets Be prepared to seize the investment opportunities 2 Increasing connectivity over

China capital marketsBe prepared to seize investment opportunities

Together we thrive

Why China?China’s economy is more open and globally connected than ever before, with a strong emphasis on trade and investment openness, and various investment channels to help investors to access its domestic capital markets.

1 HSBC Reserve Management Trends 20192 World Federation of Exchange, August 2019; Bloomberg, September 20193 Shanghai Stock Exchange, August 2019; Shenzhen Stock Exchange, August 2019

As of 2018, 1.89% of global FX reserve is allocated to RMB, compare with 1.23% at the end of 2017

Reserve managers expect to contribute 3.5% by 2020 and 5.4% by 2025 of their reserves in RMB

Internationalisation of RMB

most actively used currency in trade finance3rd

RMB is the

(as of August 2019)

5thand the

most active currency forinternational payments by value(as of August 2019)

Estimates of

USD 320bnnew foreign inflows into China’s bond market as a result of inclusion into three key global benchmark bond indexes

USD 85bninflows expected due to the inclusion of two key global equity indexes

1.89%

5.4%

China’s equity market

on the Shanghai Stock Exchange (as of August 2019)

1,508 listed companies

on the Shenzhen Stock Exchange (as of August 2019)

2,166 listed companies

China’s capital marketsare among the biggest globally yet it is largely funded by domestic investors

(by total market cap)

China’s equity market:

world’s

2ndlargest

China’s bond market:

world’s

2ndlargest

2

6 1

3 5

4 ASIFMA and FTSE Russell August 20195 Swift, July 20196 HSBC Global Research

China’s green bond marketChina represented

25%of all green bonds issued in 2018

4

China has the

2ndlargest

green bond market in the world

China capital markets Be prepared to seize the investment opportunities 2

Increasing connectivity over timeChina is gradually opening up its capital markets, with simplified channels, enlarged quotas and easier access for foreign financial institutions and investors.

Qualified Foreign Institutional Investor Scheme (QFII) launched

Opening up China’s A-share market to foreign investors for the first time

2002

RMB Qualified Foreign Institutional Investor Scheme (RQFII) launched

RMB version of QFII officially launched, allowing onshore securities to be traded

Inclusion of RMB into the International Monetary Fund’s Special Drawing Right currency basket

RMB now makes up 10.92% of the basket

Shenzhen-Hong Kong Stock Connect launched

Providing access to a market that is home to many “new economy stocks” in sectors such as technology, media and healthcare

Shanghai-Hong Kong Stock Connect launched

Providing a new route into China’s largest stock exchange

Mutual Recognition of Funds (MRF) launched

Providing mainland China and Hong Kong products with new cross-border mobility

China Interbank Bond Market (CIBM) Direct launched

Giving foreign financial institutions access to a wide range of fixed income instruments in China’s bond market

2011

2014

2015

2016

Oct 2016

Dec 2016

3China capital markets Be prepared to seize the investment opportunities

What you need to know

® China has introduced simplified channels to enter the CIBM

® Stock Connect provides easier cross-border trading between Hong Kong, Shanghai and Shenzhen stock markets

® Under PBOC Notice 159, foreign investors can now easily access CNY FX to hedge China bonds and equities portfolio

® STAR market represents a step forward in the reform of the IPO system and providing technology companies with greater access to capital

® There will no longer be any quota restriction for QFII and RQFII. Foreign investors can now invest after necessary registrations

Bond Connect northbound launched

Allowing overseas investors to trade on the CIBM with their usual international methods via the Connect platform and settle bonds more simply via Hong Kong

Daily quota of northbound and southbound stock connect increased by 3x to RMB 52bn and RMB 42bn respectively.

Inclusion of China bonds in Bloomberg indices

London-Shanghai Stock Connect

Connecting the London Stock Exchange (LSE) and the Shanghai Stock Exchange (SSE), allowing global investors in London to access shares listed in SSE via Global Depository Receipt (GDR) and Chinese investors to buy LSE-listed stocks via China Depository Receipt (CDR)

PBOC Notice 159

Offshore investors can access onshore deliverable CNY under the schemes of CIBM, Bond Connect and RQFII, with HKMA guidance on CNY for Stock Connect released in June 2019.

Jun 2017Inclusion of A-shares into MSCI’s Emerging Markets Index is announced

Driving greater demand by foreign investors for onshore exposure

Jul 2017

May 2018

Jun 2018

Apr 2019

Jun 2019A+H companies listed on the STAR Market (‘Science and Technology Innovation Board’) are eligible for trading via Stock Connect.

July 2019

STAR market represents a step forward in the reform of the IPO system and providing technology companies with greater access to capital

Aug 2019

QFII/RQFII consultation to harmonise both channels and further relax and expand the scopes.

Jan 2019

QFII and RQFII investment quota restrictions are abolished by China Safe Administration of Foreign Exchange (SAFE)

Sep 2019


Investing in China’s capital marketsWith the further opening up of the onshore capital market, offshore investors can now access China’s equity and bond markets via a variety of schemes. The schemes are designed for different types of investors and products.

Applicable products Eligible investors Source of fund Quota availability

Inbo

und

Inve

stm

ent

QFII

® Exchange-listed A-shares, bonds and warrants ® Fixed income products traded in interbank bond market ® Securities investment funds ® Index futures (for hedging only) ® Subscription to initial public offerings, additional issuance, rights issues and convertible bond issuance

® The New Third Board & Sci-Tech Innovation Board (STAR Market)

® Overseas asset management companies, insurance companies, securities firms, banks, funds, government agencies

® FCY (converted at onshore CNY)

® No investment quota*

® Only necessary registration process required*

RQFII

® Exchange-listed A-shares, bonds and warrants ® Fixed income products traded in interbank bond market ® Securities investment funds ® Index futures (for hedging only) ® Subscription to initial public offerings, additional issuance, rights issues and convertible bond issuance

® The New Third Board & Sci-Tech Innovation Board (STAR Market)

® Qualified financial institutions in designated offshore RMB markets

® FCY (converted offshore at CNY or CNH)

® Offshore RMB

® No investment quota*

® Only necessary registration process required*

CIBM

® Cash bonds in interbank market, including government bonds, People’s Bank of China (PBoC) bills, financial bonds, commercial paper and medium-term notes

® Derivatives such as bond forwards, bond lending, interest rate swaps and forward rate agreements

Sovereign entities: Foreign central banks, monetary authorities, international financial organisations and sovereign wealth funds

Non-sovereign entities:Commercial banks, insurance companies, securities companies, fund management companies, other asset management institutions accepted by the PBoC, such as pension funds, charity funds, and endowment funds, etc.


® Offshore RMB

® No quota

*In September 2019, SAFE announced that there will no longer be a quota restriction for QFII and RQFII. The rules of implementation are yet to be released.


Applicable products Eligible investors Source of fund Quota availability

Inbo

und

Inve

stm

ent

Bond Connect

® Fixed Income instruments in interbank market, including government bonds, PBoC bills,financial bonds, commercial paper, medium-term notes and other instruments

(The initial phase of Bond Connect only supports Northbound Trading by institutional professional investors)

® Central banks, monetary authorities, international financial organizations, sovereign wealth funds

® Commercial banks, insurance companies, securities firms, asset management companies, other wealth management and other financial institutions


® Offshore RMB

® No quota

Two-

way

Inve

stm

ent

China Stock Connect

Northbound

® Constituent stocks of SSE180 index and SSE380 index ® Constituent stocks of SZSE Component Index and SZSE Small/Mid Cap Innovation Index with market capitalisation not less than RMB 6bn

® Most dual-listed A and H shares on SSE or SZSE and SEHK

Southbound

® All constituent stocks of the Hang Seng Composite LargeCap Index (“HSLI”) and Hang Seng Composite MidCap Index (“HSMI”)

® H-shares in SmallCap index (“HSSI”) with market capitalisation not less than HKD 5bn

® Most dual-listed A and H shares on SSE or SZSE and SEHK

Northbound

® Overseas Institutional and individual investors *

Southbound

® Qualified mainland investors

(*ChiNext participation is limited to institutional professional investors)


® Offshore RMB

® No market quota ® Daily quota of northbound and southbound stock connect are RMB 104bn and RMB 84bn respectively.

Mutual Recognition

of Funds (MRF)

® General equity funds ® Bond funds ® Mixed funds ® Unlisted index funds ® Physical index-tracking exchange traded funds

® General investors for publicly offered funds in mainland China and offshore markets

® Offshore RMB/other currencies

® N/A


Accessing China’s Bond Markets

Index Inclusion timeline – Bond MarketForeign ownership of government bonds (% of total market)

50%

40%

30%

20%

10%

0%

US Korea Japan Emerging Market

China

41%

16.3%12.7%

16.8%

8.2%

Officially confirmed

Inclusion plan announced

5% 100%

Adding 5% each month

over 20 months

Mar2018

Jan 2019

Apr 2019

Nov 2020

Bloomberg-Barclays – Estimate inflows of USD 150bn

Source: Central banks and Treasury websites in respective countriesNote: EMs % here is average of 17 EM countries ex China, based on end of June 2019 data. The data for Korea and China correspond to end of July 2019. For US and Japan, the data are from May 2019 and March 2019 respectively.

QFII RQFII Bond Connect

Onshore Access Offshore Access

CIBMDirect

Begins on the 28th Feb 2020

Announced their intention to include China bonds into

its indexes

Completed by30th Nov 2020

Adding 1% each month

over 10 months

Sep2019

Feb2020

Nov 2020

JPM GBI-EM – Estimate inflows of USD 20bn

FTSE Russell WGBI – FTSE Russell did not include China bonds in the WGBI, but will revisit the decision at the next review in March 2020. Prior estimate suggested that once China bonds are included, inflows would be USD 150bn.


Bond Connect: Northbound operating model

Note:1. Bond Connect Company Limited, jointly owned by CFETS and HKEX, will support and assist admission and registration for Northbound investors, and liaise closely with the international Access Platforms under Bond Connect Source: HKEx

International investors

Global Access

Platforms

Global Custodian

HKEX Global Custodian

CFETS Bond

Trading System

Settlement

CMU Members

HKMA CMU

CCDC + SCH

Mainland dealers

Nominee structure

Offshore Hong Kong Mainland China

BCCL1

Trading Link

Settlement Link

Existing interface

Existing interface

® International investors trade via global platforms with assets held in custody via a Hong Kong (CMU) nominee structure


Comparison between CIBM and Bond ConnectBond Connect Northbound CIBM Direct Scheme

Eligibility and Market Entry

Eligible Investors ® Follow PBOC Notice [2016] No. 3 and Yinfa [2015 No.220 (i.e. same as CIBM Direct)

® PBOC Notice [2016] No.3:• Fls including commercial banks, insurance, securities companies, asset

managers• Other mid-term and long-term institutional

® Investors accepted by PBOC, such as pension funds, charity funds and endowment funds etc.

® Yinfa [2015] No.220: Foreign central banks, international organisations and sovereign wealth funds

Quota ® No quota restriction ® No quota restriction

Market entry/Registration

® Investors need to submit the application directly via BCCL, the joint venture between HKEx and CFETS set up to support and assist admission for Northbound investors

® BCCL will submit applications to CFETS, which in turn will submit documentation to PBOC for filing purposes

® After receiving a successful filling notification, the CFETS shall open a trading account in its system and inform the applicant via the BCCL

® Onshore account opening ® Registration at fund level ® Registration process through a Bond Settlement Agent

Investment Scope and Trading

EligibleNorthboundSecurities

® Cash bonds. The permissible bonds are all types of bonds traded in the CIBM ® Investors can participate in the primary market issuance

® Bond lending & borrowing, Bond forward, Forward Rate Agreement (FRA), Interest Rate Swap (IRS) ((For Overseas Institutional Investors’ hedging purpose only, while no restriction for central bank type investors)

® For overseas RMB clearing banks and participating banks repo is allowed to be traded

® QFIIs and RQFIIs are allowed to trade cash bond, bond IPO and interbank deposit

Trading arrangement

® Investors have direct access to CFETS via access platforms (Tradeweb and Bloomberg). The trade orders will be routed to the CFETS trading platform.

® Investors can only trade with designated bond Connect mainland dealers

® Investor has trading account with CFETS with own name ® Through CFETS platform ® Investors trade directly with CFETS members ® Trading agent to conduct trade on behalf of investors

TradingArrangement

® Trading will be conducted with designated Bond Connect market-makers only ® Investors will need to have access to foreign electronic access platform (TradeWeb is to be used initially for Bond Connect)

® Investors trade directly with CFETS members

Hedging tools available

® CNY FX hedging is available (i.e. CNY FX forward/swap/option) ® Bond lending, bond forward, IRS, CCS, FRA (for hedging purpose only) ® CNY FX hedging is available (i.e. CNY FX forward/swap/option)

Trading Periods ® The trading hours are 09:00-12:00 and 13:30-16:30 (Bejing time) on each trading day


Accessing China Equities

Index Inclusion timeline – Equity Market

Source: PBoC, CSRC, HKEX, JPX, Reuters, US Fed,TWSE,KRXNote: China, US, HK, Korea, Japan, Taiwan and Brazil data by end of 2018, data of other regions by end-2016

% market cap of foreign investors

40%

30%

20%

10%

0%

US Korea Japan Emerging Market

China

15%

33%30%

25%

3.1%

1st TrancheAnnounced 2nd Tranche

MSCI – Inflows could be USD 75bn over the next 2 years counting all funds tracking the index

3rd Tranche 4th Tranche 5th Tranche

Jun 2017

May 2018

Aug 2018

May 2019

Aug 2019

Nov2019

QFII RQFII Stock Connect

Onshore Access Offshore Access

FTSE is evaluating after the 1st Tranche

1st TrancheAnnounced FTSE is evaluating after the 1st

Tranche

Feb2018

Jun 2019

Preliminary Sep 2019

FTSE Russell – Initial net passive inflows of USD 10bn

Preliminary Mar 2020


RMB: Regulatory developments PBOC Notice 159

Summary

® PBOC Notice 159: allows offshore RMB participating banks to offer onshore deliverable CNY to offshore investors

® Products in scope: Spot, Forward, FX Swap, Cross Currency Swap and FX Options

® Access channels in scope: Bond Connect, CIBM, RQFII, Stock Connect

® Out of scope: QFII

Benefits to investors

® Reduced currency basis risk for bond investors (CNY preferable to CNH)

® Leverage existing offshore legal documentation (i.e ISDA) for FX derivative products

® Ability to execute deliverable CNY with existing offshore counterparty (HSBC GM desks)

® Third party FX viable* ® Pre-fund of USD with custodian prior to bond settlement date not mandatory

Documentation

® Clients are able to use existing ISDA documentation to face offshore RMB participating bank entities for onshore deliverable CNY*

® Clients sign ‘HSBC’s Letter of Undertaking’ to confirm adherence to ‘real need’ principle and other obligations

Control/Monitoring

® All CNY business must conform to ‘real needs’ principle

® Offshore RMB participating banks must fulfil obligations to ensure transactions arise from ‘real needs’

® Ensure RMB business is conducted under principles of KYC, due diligence on clients’ activities

® Monitoring large transaction flows ® Derivative transactions must correlate to onshore investments

® Hedge an existing securities position (amount and tenor)

® Where securities are sold down, investors must adjust their hedging to match the new (reduced) securities position*RQFII and CIBM direct access channel


RMB: Onshore deliverable CNY FX execution options

CNY FX execution by access channel (offshore offering)Schemes Bond Connect CIBM Direct RQFII Stock Connect QFII

CNY FXexecution counterparty

® Access CNY FX from settlement banks in HK; or

® Access CNY FX from Offshore RMB participating banks (under PBOC 159)

® Access CNY FX from offshore RMB participating banks (under PBOC 159); or

® Execution with China onshore FX banks

® Access CNY FX from offshore RMB participating banks (under PBOC 159); or

® Execution with China onshore FX banks

® Northbound Stock Connect investors obtain access to CNY indirectly through ‘Eligible Brokers’ which are:• Exchange participants of Stock

Exchange of HK (SEHK)• Clearing participants of the HK

Securities Clearing Company (HKSCC) which are eligible to participate in the Northbound Stock Connect

Execution with China onshore FX banks -- Not allowed to offer in offshore

Documentation Letter of Undertaking Letter of Undertaking Letter of Undertaking Operational model and documentation to be announced

N/A: out of scope in PBOC Circular No. 159

ISDA with offshore RMB participating banks



PermittedCNY FX products Products in scope: Spot, Forward, FX Swap, Cross Currency Swap and FX Options

Direct FX Execution*

® Live CNY FX rates executed directly with HSBC offshore trading desks ® Ability to align bond execution, spot and forward FX ® Execution within CNY market hours

Automated FX Execution

® 3 daily execution times ® Pre-agreed margin applied to transparent FX rate ® Available for clients using HSBC as Global Custodian

*For CNY FX transactions (both spot and hedging), investors need to ensure it is conducted on genuine need basis HSBC has the right to review investors’ portfolio and request unwind where necessary

Note: Clients should consult their HSBC local Sales representative for availability


® Allow our international investors direct access to the CNY FX conversion and hedging via their local HSBC entity.

® Industry leading on providing comprehensive CNY FX solutions for all investment schemes (CIBM, Bond Connect, RQFII and Stock Connect) on the back of PBOC159.

Leading bank for accessing onshore CNY FX directly in local markets across the globe

HSBC China has the most banking and investment related licenses among foreign banks

Leading foreign bank in providing China connectivity ® HSBC is ranked No.1 foreign bank in Bond

Settlement Agent (BSA) module (QFII/RQFII/ Direct CIBM) and in full CIBM market (as of July 2019)

® HSBC is ranked No.1 in number of clients custody

Number 1 Foreign Bank in CIBM

Why partner with HSBC to access China?With our global network and in-depth local knowledge, we are uniquely qualified to fulfil the needs of corporate and institutional businesses looking to seize the huge opportunities within China’s capital markets.

® Over 120 group and bespoke investor trips to China each year

® Flagship annual China conference in Shenzhen with 150 corporates

® China Discovery Forum with 20 corporates

® Dedicated Corporate Access team in Shenzhen

Highly active in Corporate Access ® Investors can gain exposures to China bond market by investing in HSBC’s China-Access products.

® Vast range of underlyings available, from China government bonds, ABS and Panda bonds

® Some product types may provide financing to clients such as TRS and Bond Forwards.

Strong China-Access structuring products provider

Our combined trading and custody strategy has seen us capture significant Stock Connect market share where we hold between 35-40% of the Shanghai Connect shares (as of July 2019)

Significant market share in Stock Connect

HSBC Qianhai was the 1st majority foreign owned securities company in China. It was named as the ‘China Emerging Securities Broker’ at the China Best Securities Companies Award Ceremony in Beijing in 2019.

The leading foreign owned securities company in China

® HSBC China was one of the first Bond Connect Participating Dealers and was among the first to trade on Bond Connect.

® HSBC was recognised as a Top Dealer in 2019 Bond Connect Awards, out of the 34 participating dealers at the time.

Leading bank in Bond Connect

HSBC is the leading onshore custodian bank in theQFII and RQFII schemes, with 32.69% and 51.98% ofmarket share in terms of quota under custody respectively (as of July 2019)

Leading bank inQFII and RQFII custody


Timing

HSBC QianhaiHSBC partnered with Qianhai Financial Holdings and launched HSBC Qianhai in December 2017. HSBC is the first foreign bank to open a majority-owned joint venture securities company in mainland China, providing a universal banking platform to our corporate, institutional and commercial banking clients in China and globally:

® Investment Banking: Underwriting and sponsoring the issuance of domestic equities, including IPOs, and debt, advising on corporate mergers and acquisitions ® Securities Brokerage: Broking of listed securities on the Shanghai and Shenzhen Stock Exchanges ® Equity Research: Publishing research reports related to A-shares in both English and Chinese simultaneously for distribution to clients globally, which is a market first.

3. Keeping you informed with Global Research

2. Securities brokerage – Helping clients to access China’s listed securities

1. Sharing your strategic vision

We start by understanding your businessWe recognise that the world’s capital markets are complex and highly interconnected, and that clients with strategic interests in China look to us for advice and well-established execution services.

Only by investing the time to understand your business’s background, strategy, people, infrastructure, policies and procedures we can provide you with the bespoke services you need to achieve your goals.

Providing a range of China securities brokerage services By leveraging HSBC’s long-established connectivity to issuers, markets and investors, HSBC Qianhai gives you world-class brokerage services, and access to China’s exchange traded equity and fixed income markets.Our broad execution capabilities and strong network can help you enhance your market liquidity and efficiency. Our range of services includes:

® Connection to HSBC teams around the world in 80 countries and cash bonds across 50 countries

® Sales coverage on cash equities and bonds ® Real-time connectivity to the Shanghai and Shenzhen Stock Exchanges ® Execution management and update ® Research publication ® Corporate Access services

High quality, award-winning research and analysis Our analysts are ready to equip you with topical, relevant and actionable ideas and commentary. We aim to cover over 400 pure A-share companies by the end of 2020, with a focus on the higher growth new economy sectors. The research reports will be published in English and Chinese simultaneously and distributed globally, as the first of their kind. Insights include:

® Major investment themes ® Breaking news ® Global views and local ideas ® Insight on specific opportunities ® Strong connections to HSBC’s research network and offshore research capabilities

® Global research on the macro-economy, foreign exchange, stocks and fixed income in existing and emerging markets


A full range of M&A advisory servicesWe aim to offer M&A advisory services to state-owned and privately owned Chinese corporates, multinationals, financial sponsors and sovereign wealth funds.

Our experienced teams will be able to help you achieve further growth and expansion through both domestic, outbound and inbound activities including:

® Overseas investments ® M&A transactions

® Corporate restructurings

We will also work closely with HSBC’s global M&A bankers, sector specialists and financing solutions teams to execute complex cross-border transactions.

A one-stop M&A solutionBringing together our global network and our M&A business provides a one-stop solution which will aim to help Chinese corporates, institutions and multinationals achieve their M&A ambitions including:

® Relevant, up-to-date market intelligence ® Access to HSBC’s full suite of global and domestic financing and risk management products

5. Experience and advice in Mergers and Acquisitions (M&A)

Experienced M&A teams with a breadth of knowledge ® Our global M&A business is handled by specialist M&A bankers in nearly 30 countries

around the world, including some of the fastest growing emerging markets ® Product specialists delivering on-the-ground and in-depth insights ® Bankers based in the relevant country or region ® Specialists with relevant industry expertise

HSBC Qianhai

4. Extensive capabilities in underwriting and sponsoring

Need securities underwriting and sponsoring advice?HSBC Qianhai offers a wide range of securities underwriting and sponsoring expertise:

® Primary equity and debt capital markets

® Secondary equity offerings ® Bespoke structured financing ® Corporate advisory services:• Business valuation• Negotiation• Pricing and structuring

of transactions

Looking to access China’s debt capital markets?If you’re looking to raise funds from fixed income instruments, we can help you access China’s huge onshore debt capital markets, one of the largest bond markets in the world. We offer:

® Well-established international bank with on-the-ground debt capital markets teams

® Holistic financing solutions encompassing both the exchange and interbank markets jointly with other HSBC entities

® Facilitation of two-way cross-border financing

® Support for domestic issuers to access the international debt markets

® Competitive debt financing solutions

Require equity capital markets expertise?Our capabilities in onshore equity issuance complement HSBC’s leading international banking platform. This vital piece of our capital financing services covers a broad range of products including:

® Initial public offerings ® Follow-on offerings ® Rights, convertible bonds, exchangeable bonds, and preferred shares issues


® HSS has assisted to obtain the single largest¹ RQFII quota granted by SAFE

® Landmark deals:• KAsset Thailand – the first Thailand RQFII• Blackrock – the first US RQFII• CIMB-Principal – the first Malaysia RQFII• First RQFII custodian bank in Ireland

and Japan

RQFII 51.98%1

Notes:1. Market share in terms of total approved RQFII quota as of Jun 2019. Source: SAFE/CSRC website2. Market share in terms of no. of CIBM clients (excluding foreign central banks, international financial institutions) end of Jul 2019,

per PBOC website3. Market share in terms of No. of QFII as of Jul 2019. Source: SAFE/CSRC websites 4. As of Jul 2019, Custody and sovereign wealth funds AUC only, in terms of the services provided by HSBC Securities Direct

Custody Hong Kong 5. Act as Trustee for 11 out of the 19 HK funds approved to be distributed in China, market share = (11/19) x 100, in terms of the

services provided by HBAP. Source of all figures under Mutual Recognition of Funds: SFC/CSRC websites

6. Qualified Domestic Institutional Investor (QDII). The total AUM of all funds under HSBC as custodian (offshore) is used to compare with the total AUM of QDII funds custodian in the market (offshore). As of Jun 2019. in terms of services provided by HBAPSource: Fund Management Company’s website and AMAC’s website (Asset Management Association of China)

7. Under PBOC Announcement No.3 [2016]. Source of the two bullets under CIBM: HSBC China8. Qualified Domestic Limited Partnership (QDLP). In terms of number of QDLP clients won. As of Jun 2019. Source: HSBC internal

source and SFO (Shanghai Municipal Government Financial Services Office)9. As of date: Jul 2019. Market share in terms of account opening request received by HSBC divided by total number of registered

institutional investors under Bond Connect, in terms of the services provided by HSBC Securities Direct Custody Hong Kong. Source: Bond Connect website

Outbound Investment

Bilateral

Inbound Investment

HSBC’s China Cross-border Business Success

® USD3.91bn AUC as of Jun 2019 ® Won 15 QDII custodian deals in 2019

QDII 21.33%⁶

® USD432mn AUM as of Jun 2019 ® Active market player for serving QDLPs,

HSS is currently serving 5 clients as of Jun 2019

QDLP 18.42%8

® One of the market leaders in Shanghai/Shenzhen – HK Stock Connect northbound since the scheme first launched in 2014 and 2016 respectively

Stock Connect 33.38%

4

® Acting as Trustee for 11 out of 19 HK domiciled funds approved for distribution in China under the MRF scheme

® Further 10 northbound fund approvals pending (could reach total AUM > $10bn in due course)

Mutual Recognition of Funds

58%5

® Acts as QFII custodian to 8 out of 16³ sovereign entities currently investing in the China market as of date

® Total approved QFIIs (as of Jun 2019): 312 ® Best QFII Custodian (2014-2018) The

Asset Triple A Asset Servicing, Investor and Fund Management Awards

® 100% success rate in QFII application

QFII 32.69%3

® One of the first banks to trade with overseas institutional investors under Bond Connect following its launch

Bond Connect (north-trading link) 28%

9

® Facilitated the first overseas financial institution registered under the new direct access program⁷ as the appointed settlement agent in 2016

® HSBC was the first foreign-invested bank licensed by PBOC to provide integrated trading and settlement services in CIBM, almost 12 months ahead of others

CIBM 33.14%2


28%

Key industry awards recognizing HSBC’s strengthAsiamoney Global RMB Poll 2019

® Best overall global RMB products/services ® Best overall offshore RMB products/services ® Best overall onshore RMB products/services (all providers)

® Best RMB in foreign exchange (offshore and onshore)

® Best CNH derivatives (offshore) ® Best CNH research and analytics (offshore)

The Asset Triple A Asset Servicing, Institutional Investor and Insurance Awards 2018

® Best RMB Bank – UK ® Best RMB Bank – USA ® Best RMB Bank – Germany ® Best RMB Bank – Malaysia ® Best International Custodian – China ® Best CIBM Direct Custodian – China ® Best Subcustodian – China ® Best QFII Custodian – China ® Best RQFII Custodian – China

Asia Asset Management Best of the Best Awards 2019

® Best RMB Manager

FinanceAsia Country Awards for Achievement 2018

® Best International Bank – China

FinanceAsia Achievement Awards 2018

® Best Belt and Road Bank

Asiamoney New Silk Road Finance Awards 2018

® Best Research House for BRI ® Best Bank for BRI-related financing in the region – South East Asia

® Best International Bank in the Region for BRI – Middle East and Africa

GlobalRMB China Capital Markets Awards 2018

® Best G3 bond house for Chinese issuer

FX Week Best Banks Awards 2018

® Best Bank for the Renminbi

Euromoney Awards for Excellence 2019

® Hong Kong’s Best Bank ® Asia’s Best Bank for Financing

® Asia’s Best Bank for Sustainable Finance

IFR Awards 2018

® Bond House of the Year ® Asia Bond House of the Year



Published: October 2019

For Professional Clients and Eligible Counterparties only. Not for Retail Customers.

Issued by HSBC Bank plc8 Canada Square,LondonE14 5HQ

Authorised the by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority.

Documents

China capital markets - HSBC › - › media › gbm › insights › ... · China capital markets Be prepared to seize the investment opportunities 2 Increasing connectivity over