China's biggest bond trader scales up overseas operations

Shanghai

CHINA'S biggest broker of government bonds by trading volume is scaling up its overseas offices to attract more customers in the world's largest financial hubs.

China International Capital Corp is increasing headcount for debt-related services in New York, London, Tokyo and Singapore, and has already seen active customers increase by more than 30 per cent, according to Patty Li, executive director of the firm's fixed-income department. The goal is to become a bridge for foreign investors interested in the China market, she said.

"We have begun to deploy additional manpower" to major financial centres overseas, Shanghai-based Ms Li said in an interview last week. "Those on the ground are actively applying for licences from regulators. At the same time, before formally obtaining the licences, we have started research on business opportunities to lay the foundation for future development."

CICC's expansion plans - the firm posted China's largest government-bond trading volumes in the first half of the year - is the latest step in a counter-offensive by local companies against the rising presence of overseas banks in the Asian nation. Huatai Securities Co, one of the country's biggest brokerages, is aiming to double its share of international business to about 20 per cent of revenue, while Citic Securities Co and Haitong Securities Co have also moved to grow abroad.

In the other direction, US financial behemoths such as BlackRock Inc and Goldman Sachs Group Inc are increasing their operations in China as the country opens up its US$45 trillion financial industry.

The drive to market Chinese government bonds to more foreign clients comes amid their growing popularity among global investors this year. Overseas funds have boosted holdings of the nation's sovereign debt to record highs, taking advantage of rising yield premiums and relatively low correlations with other asset classes.

The surge in foreign interest can be seen in volumes pouring through the Bond Connect channel, which allows investors from Mainland China and overseas to trade in each other's markets.

Secondary trading of government debt via the channel jumped to nearly four times the entire total of 2020 in the first half of this year, said Ke Wang, managing director for global rates trading in CICC's fixed-income department in Beijing. The amount changing hands through the China Interbank Bond Market has risen to about 2.7 times last year's total, he said.

"Although we're currently faced with some constraints due to the pandemic, we still added dozens of overseas corporate customers in the first half of this year through long-distance roadshows and hosting virtual forums," Mr Wang said. "At the same time, the number of active trading customers increased by about 31 per cent."

Looking ahead, Mr Wang believes CICC's role as a market maker for investors at home and abroad will help it attract more foreign clients. It is likely to gain further business from overseas funds diversifying their holdings beyond government debt into other asset classes such as green bonds and those related to social and governance causes, he said. BLOOMBERG