China capital markets - Be prepared to seize the investment opportunities INVESTOR GUIDE - HSBC Global Banking and Markets
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China capital markets Be prepared to seize the investment opportunities INVESTOR GUIDE
China capital markets Be prepared to seize the investment opportunities | 2 China is opening up new doors to investment China is widely regarded We are the perfect partner as one of the most to help you take advantage attractive markets globally of the opportunities in for investors. Yet, many China's capital markets. corporate and institutional Recognised for our businesses may be unsure strength, experience and of where the opportunities unrivalled network, we are lie or how to take here to support you. advantage of them. The good news is that in recent years, China has been reforming its capital markets, liberalising its financial system and internationalising its currency to encourage more foreign corporates and institutional investors to participate in its economy.
China capital markets Be prepared to seize the investment opportunities | 3
Seizing China’s rising potential
China's economy is more open and globally connected than ever before,
with strong emphasis on trade and investment openness, and emerging
new channels to help investors access its domestic capital markets.
Did you know? China’s bond market Equity access quota
is gradually becoming a part USD RMB
of the global asset allocation
for fixed income investors 94.5bn 589bn
China’s capital markets QFII (Qualified RQFII (RMB Qualified
Foreign Institutional Foreign Institutional
are among the biggest globally Investor) quota issued Investor) quotas issued
yet it is largely funded by RMB bond issuance
36
domestic investors RMB daily
26
in 2016, up 56%
trn from 2015 northbound
China’s equity market: China’s bond market: bn quota
world’s world’s RMB daily
2 nd
3 rd Almost half of
global fixed 21 southbound
bn quota
largest
(by total market cap)
largest
49% income investors
plan to increase
for Shanghai and Shenzhen – Hong Kong
Stock Connect Programmes
1
exposures to China in (as of Sep 2017)
4
the next 12 months
China’s equity market
Internationalisation of RMB
1,355
3
listed RMB is the
companies
3 rd
HSBC Qianhai is the most actively used
1
on the Shanghai Stock Exchange
st
majority currency in trade finance
(as of Sep 2017)
foreign owned
2,054
(as of Oct 2016)
listed and the
6
companies
on the Shenzhen Stock Exchange
securities company in China
(with a 51% stake)
th most used global
payment currency
(as of Oct 2017)
(as of Oct 2017)
2 5
1 World Federation of Exchange, Dec 2016; Bank of International Settlements, Mar 2017 4 China Securities Regulatory Commission, Sep 2017; Hong Kong Stock
2 Shanghai Stock Exchange, Sep 2017; Shenzhen Stock Exchange, Oct 2017 Exchange, Sep 2017; State Administration of Foreign Exchange, Sep 2017
3 People's Bank of China, Sep 2017; FinanceAsia's Asian Bond Investor Survey, Nov 2017 5 Swift 2017Increasing connectivity China capital markets Be prepared to seize the investment opportunities | 4
over time What you need to know
China is gradually opening up its capital markets, • China has introduced simplified • Easier cross-border trading
channels to enter the CIBM between Hong Kong, Shanghai
with simplified channels, enlarged quotas and easier and Shenzhen stock markets
access for foreign financial institutions and investors. • China has enlarged QFII and
RQFII quotas to meet increasing • Easier access to interbank foreign
demand and has improved exchange market to hedge RMB
the repatriation processes foreign exchange exposure
with onshore counterparties
2002 June 2017
Qualified Foreign 2016 Inclusion of A-shares into
Institutional Investor Scheme MSCI’s Emerging Markets
(QFII) launched China Interbank Bond Market Index is announced
(CIBM) Direct launched
Opening up China’s A-share
2014 To be implemented in 2018, driving
market to foreign investors for Giving foreign financial institutions greater demand by foreign investors
Shanghai-Hong Kong Stock
++
the first time access to a wide range of fixed income for onshore exposure
Connect launched
instruments in China’s bond market
Providing a new route into
+
China’s largest stock exchange
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2011 October 2016
RMB Qualified Foreign Institutional Inclusion of RMB into the International
Investor Scheme (RQFII) launched Monetary Fund’s Special Drawing Right
currency basket
RMB version of QFII officially launched,
allowing onshore securities to be traded RMB now makes up 10.92% of the basket
2015 July 2017
December 2016 Bond Connect launched
Mutual Recognition of Funds
(MRF) launched Shenzhen-Hong Kong Stock Connect launched Allowing overseas investors to trade on the
Providing access to a market that is home to many CIBM with their usual international methods
Providing mainland China and
"new economy stocks" in sectors like technology, via the Connect platform and settle bonds
Hong Kong products with new
media and healthcare more simply via Hong Kong
cross-border mobilityChina capital markets Be prepared to seize the investment opportunities | 5
Investing in China’s capital markets
With 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 Dealt currency* Asset allocation
• Exchange-listed A-shares, bonds and warrants • Overseas asset management Onshore CNY No restriction on
QFII • Fixed income products traded in interbank bond market companies, insurance asset allocation
Scheme companies, securities
• Securities investment funds
firms, banks, funds,
• Index futures (for hedging only) government agencies
• Subscription to initial public offerings, additional
issuance, rights issues and convertible bond issuance
• Exchange-listed A-shares, bonds and warrants • Qualified financial Onshore CNY No restriction on
Inbound RQFII • Fixed income products traded in interbank bond market institutions in designated asset allocation
Scheme offshore RMB markets
Investment • Securities investment funds
• Index futures (for hedging only)
• Subscription to initial public offerings, additional
issuance, rights issues and convertible bond issuance
• Cash bonds in interbank market, including government • Type 1: Central banks, monetary Onshore CNY and No restriction on
bonds, People’s Bank of China (PBoC) bills, financial authorities, international foreign currency asset allocation
bonds, commercial paper, medium-term notes, financial organizations,
bond forwards, bond lending and other instruments sovereign wealth funds
• Derivatives such as bond forwards, bond lending, • Type 2: RMB clearing
CIBM interest rate swaps and forward rate agreements banks, overseas RMB
Scheme • Type 2 and 4 investors are only allowed to invest in participating banks
derivatives for hedging purposes; type 3 investors are • Type 3: QFIIs and RQFIIs
only allowed to invest in cash bond and certificates • Type 4: Other foreign
of deposit; no restriction for type 1 investors institutions
*CNY refers to onshore RMB and CNH refers to offshore RMB.China capital markets Be prepared to seize the investment opportunities | 6
Investing in China’s capital markets
Applicable products Eligible investors Dealt currency Asset allocation
Inbound • Fixed Income instruments in interbank market, • Central banks, monetary CNH or CNY No restriction on
Investment including government bonds, PBoC bills, authorities, international (dealt offshore) asset allocation
financial bonds, commercial paper, financial organizations,
Bond
medium-term notes and other instruments sovereign wealth funds
Connect
(The initial phase of Bond Connect only supports Northbound • Commercial banks, insurance
Trading by institutional professional investors) companies, securities firms,
asset management companies,
other wealth management and
other financial institutions
Northbound Northbound CNH N/A
• Constituent stocks of SSE180 index and SSE 380 index • All Hong Kong and
• Constituent stocks of SZSE Component Index overseas institutional and
China Stock and SZSE Small/Mid Cap Innovation Index with individual investors
Two-way Connect market capitalisation not less than RMB 6 billion Southbound
Investment Southbound • Qualified mainland investors
• H-shares in LargeCap index and Mid-Cap index (Remarks: ChiNext participation is limited
• H-shares in SmallCap index with market to institutional professional investors)
capitalisation not less than HKD 5 billion
• Dual-listed A and H shares on SSE or SZSE and SEHK
• General equity funds • General investors for publicly N/A Funds sold in
• Bond funds offered funds in mainland Hong Kong
Mutual Fund
China and offshore markets cannot be
Recognition • Mixed funds
invested mainly
(MRF) • Unlisted index funds in Hong Kong,
• Physical index-tracking exchange traded funds and vice versaChina capital markets Be prepared to seize the investment opportunities | 7
We know the way
With our unrivalled heritage in China together with our global
presence, leading service and financial expertise, we can show
you and your business the way.
Global Leading Leading
network international international
with over
bank in bank for
3,900 China RMB
offices We are the leading international bank with We have established RMB trade
the largest onshore network in China and settlement capabilities across more
across 67 countries and territories.
24 China desks around the world. than 50 markets globally and dedicated
RMB experts in key offshore centres.China capital markets Be prepared to seize the investment opportunities | 8
HSBC Qianhai: Your competitive advantage
We have partnered with Qianhai Financial Holdings to offer HSBC Qianhai. HSBC Qianhai is your simple,
convenient doorway into China's capital markets. HSBC is the first foreign bank to have a majority-owned
securities joint venture in China.
At HSBC Qianhai, we work closely with HSBC’s bankers and product specialists to bring you a broad spectrum of investment banking and market products and solutions
Timing 1. Sharing your strategic vision
Phase 1 – we have obtained Phase 2 – by the end of We start by understanding your business
the following licenses in 2018 we are applying We recognise that the world’s Only by investing the time to
November 2017 to offer: for licence to offer: capital markets are complex and understand your business’s
highly interconnected, and that background, strategy, people,
• Underwriting and sponsoring • Mergers and acquisitions advisory
clients with strategic China interests infrastructure, policies and
• Brokerage • Trading look to us for advice and well- procedures we can provide you
• A-share research • Asset management established execution services. with the bespoke services you
need to achieve your goals.
2. Extensive capabilities in underwriting and sponsoring
Need securities underwriting Looking to access China’s debt capital markets? Require equity capital markets expertise?
and sponsoring advice? If you’re looking to raise funds from fixed income instruments, Our capabilities in onshore equity issuance complement
HSBC Qianhai offers a wide range of securities we can help you access China’s huge onshore debt capital HSBC’s leading international banking platform.
underwriting and sponsoring expertise: markets, one of the largest bond markets in the world. We offer: This vital piece of our capital financing services
• Well-established international bank with covers a broad range of products including:
• Primary equity and debt capital markets
on-the-ground debt capital markets teams • Initial public offerings
• Secondary equity offerings
• olistic financing solutions encompassing
H • Follow-on offerings
• Bespoke structured financing
both the exchange and interbank markets • Rights, convertible bonds, exchangeable bonds,
• Corporate advisory services: jointly with other HSBC entities and preferred shares issues
» Business valuation • Facilitation of two-way cross-border financing
» Negotiation • upport for domestic issuers to access
S
» Pricing and structuring of transactions the international debt markets
• Competitive debt financing solutions including:
» Enterprise bonds, » Asset backed securities
corporate bonds, » Panda bonds
medium-term notes
» H
ybrid and
and commercial paper
sustainable bonds
» Financial bondsHSBC Qianhai: China capital markets Be prepared to seize the investment opportunities | 9
Your competitive advantage
3. Experience and advice in 4. Keeping you informed 5. Helping you access
Mergers and Acquisitions (M&A) with Global Research China’s markets
A full range of M&A advisory services (upon obtaining license)* High quality, award-winning Providing a range of China
We aim to offer M&A advisory services to state-owned and privately research and analysis securities brokerage services
owned Chinese corporates, multinationals, financial sponsors and Our analysts are ready to equip you By leveraging HSBC’s long-established
sovereign wealth funds. with topical, relevant and actionable connectivity to issuers, markets and
Our experienced teams will be able to help you achieve further ideas and commentary. We aim to cover investors, HSBC Qianhai gives you
growth and expansion through both domestic, outbound and inbound over 400 pure A-share companies by world-class brokerage services, and
activities including: the end of 2020, with a focus on the access to China's exchange traded
higher growth new economy sectors. equity and fixed income markets.
• Overseas investments • Corporate restructurings The research reports will be published
Our broad execution capabilities and
• M&A transactions in English and Chinese simultaneously
strong network can help you enhance
and distributed globally, as the first
We will also work closely with HSBC’s global M&A bankers, your market liquidity and efficiency.
of their kind. Insights include:
sector specialists and financing solutions teams to execute complex
Our range of services includes:
cross-border transactions. • Major investment themes
• Breaking news • Connection to HSBC teams around
the world in 80 countries and cash
• Global views and local ideas
bonds across 50 countries
• Insight on specific opportunities
Experienced M&A teams with a breadth of knowledge • Sales coverage on cash equities
• Strong connections to HSBC’s and bonds
• Our global M&A business is handled by specialist M&A bankers research network and offshore
in nearly 30 countries around the world, including some of today’s • Real-time connectivity to the Shanghai
research capabilities
fastest growing emerging markets and Shenzhen Stock Exchanges
• Global research on the
• Product specialists delivering on-the-ground, in-depth insights • Trade reporting
macro-economy, foreign exchange,
• Bankers based in the relevant country or region stocks and fixed income in existing • Research publication
• Specialists with relevant industry expertise and emerging markets • Corporate access services
A one-stop M&A solution
Bringing 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
*We are applying for a license to offer M&A advisory and other services by the end of 2018.A strong partner in China China capital markets Be prepared to seize the investment opportunities | 10
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.
Leading foreign bank in Strong presence in Leading bank in
providing China connectivity the Pearl River Delta Bond Connect
HSBC China has the most banking Our market leadership in Hong Kong has provided HSBC China is one of the Bond Connect onshore
and investment related licenses among a strong basis on which to build a sizeable presence in the dealers appointed by the PBoC to provide quotes and
foreign banks. Pearl River Delta area, particularly in the growth areas of: trade directly with foreign investors.
• Foreign exchange • Metals HSBC Hong Kong is one of the settlement banks in Hong
Kong permitted to provide foreign exchange conversion from
• Derivatives • Cross-border businesses foreign currencies to RMB at onshore CNY rates and related
hedging services, and also offers custodian services.
Best offshore RMB services
provider across Asia Pacific Highly active in
HSBC has been the winner of “Best Overall Provider corporate access
of Offshore RMB Products and Services” in the Asiamoney Strong in China Interbank
• Over 120 group and • China Discovery
Offshore RMB Poll for six consecutive years, and voted as
bespoke investor trips to Forum with 20 corporates
Bond Market (CIBM)
the best in the following categories in 2017:
China in 2017 • First foreign bank approved as joint lead
• Liquidity management • Advice/information • Dedicated corporate
• Flagship annual China access team in Shenzhen underwriter for Panda bond issuances by offshore
on offshore RMB
• Clearance, transaction conference in Shenzhen non-financial corporates in CIBM. This is on top
regulations
banking and settlement with 150 corporates of the current capabilities to act as joint lead
• Fund services underwriter for Panda bond issuance by foreign
• Bond origination financial institutions and sovereigns.
• Derivatives
• Research • Bond settlement agents to assist foreign investors
• Foreign exchange
• Fund investment Leading bank in to access the onshore interbank bond market.
• Wealth management QFII and RQFII custody • Leading wallet share in offshore central banks
trading among foreign banks.
HSBC is the leading onshore custodian bank in the
QFII and RQFII schemes, with 33% and 54% of market
share in terms of quota under custody respectively
(as of Sep 2017).
Extensive China 1
Multi-award winning
research capabilities in Asia
We have comprehensive research coverage of the Significant market share • Asiamoney Country • FinanceAsia Country
China market across all asset classes on topics including: in Stock Connect Awards 2017 – Best Awards 2017 – Best
• Economics • Equities • Rates International Bank in China Foreign Bank in China
Our combined trading and custody strategy
• Credit • Fixed Income • Climate change has seen us capture significant Stock Connect • Euromoney Awards for
market share where we hold between 40-45% Excellence 2017 – Asia’s
• Currencies of the Shanghai Connect shares. Best Bank
2 3
1 Internal HSBC analysis based on information from the State Administration of Foreign Exchange 3 www.gbm.hsbc.com/about-us/awards/2017
2 Internal HSBC analysis based on information from the Hong Kong Stock ExchangeSeize the investment opportunities in China’s capital markets. To learn more, please contact your HSBC relationship manager to discuss the opportunities. Visit our websites: HSBC China www.hsbc.com.cn HSBC Global Banking and Markets www.gbm.hsbc.com This document is issued by HSBC Bank plc (“HSBC”). HSBC does not warrant that the contents of this document are accurate, sufficient or relevant for the recipient’s purposes and HSBC gives no undertaking and is under no obligation to provide the recipient with access to any additional information or to update all or any part of the contents of this document or to correct any inaccuracies in it which may become apparent. Receipt of this document in whole or in part shall not constitute an offer, invitation or inducement to contract. The recipient is solely responsible for making its own independent appraisal of the products, services and other content referred to in this document. This document should be read in its entirety and should not be photocopied, reproduced, distributed or disclosed in whole or in part to any other person without the prior written consent of the relevant HSBC group member. HSBC Bank plc is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. It is listed with the registration number 114216. HSBC Bank plc is a company incorporated under the laws of England and Wales with company registration number 14259 and its registered office at 8 Canada Square, London E14 5HQ. Copyright: HSBC Group 2017. ALL RIGHTS RESERVED.
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