Bond markets in Macao and Hong Kong gain momentum with new tools and closer ties

For businesses in Macao and Hong Kong, the evolving landscape of the bond market, particularly concerning the Chinese Yuan (RMB), presents significant opportunities for growth and financial integration. 

Now Bloomberg has launched a new tool that allows investors to electronically trade bonds in Chinese currency (RMB) using other bonds as security, specifically those traded through the Northbound Bond Connect scheme. The tool was developed in collaboration with the China Foreign Exchange Trade System (CFETS), a major player in the financial industry. Some 15 global investors have already used the new system to complete these types of trades with designated market makers.

The new arrangement “is a positive step to increase activity in the offshore RMB market,” said Bing Li, head of Asia Pacific at Bloomberg, in a press release. He also stated that this should strengthen Hong Kong’s role as a key renminbi centre outside of mainland China, and encourage more international investors to participate in China’s bond market over the long term.

[See more: Fitch Ratings predicts slower growth for Macao this year]

The new Bloomberg tool builds on recent efforts to boost the market for RMB bonds traded outside of mainland China, using both Hong Kong and Macao. In late January, the Bank of China (BoC) Macao issued a two-year bond worth 1 billion yuan (approximately US$137.35 million). A day later, Industrial and Commercial Bank of China (ICBC) Macao sold a three-year bond worth US$250 million that has a variable interest rate.

These bond sales were the first after the Hong Kong Monetary Authority (HKMA) and the Monetary Authority of Macao (AMCM) connected their systems for clearing and settling bond transactions. Tirso Olazábal, a Hong Kong-based partner at MdME who advised on the BoC Macao deal, told Macao News that the move shows the market is becoming more advanced.

“The issuance demonstrates investor appetite for Macao’s debt market infrastructures and sets a precedent for pricing and distribution channels, particularly for issuers targeting lusophone investors seeking RMB exposure,” Olazábal explained. He added that the increasing international use of the Chinese yuan and the growing need for diverse investment options are improving the prospects for issuing bonds in this currency. 

Macao’s Financial System Act (FSA) has given more authority to Macao Central Securities Depository and Clearing Limited – Photo by pl.yu

Closer ties and Macao’s Financial System Act

These deals in Macao are part of both SARs’ efforts to strengthen their financial connections with mainland China. In mid-January, the HKMA and the People’s Bank of China announced six measures to deepen their financial cooperation, including expanding the types of bonds that can be used as security for short-term loans in RMB, and further opening up the market for these types of short-term loans to all foreign institutional investors.

The bond issuance comes as Macao’s Financial System Act (FSA) simplifies the process by giving more authority to the Macao Central Securities Depository and Clearing Limited (MCSD), explained Hugo Maia Bandeira, a founding partner at Macao-based CFB Lawyers who advised on the ICBC USD deal.

[See more: How experts see the role of Macao’s bond market in diversifying the local economy]

“By waiving the need for the chief executive’s endorsement for the issuance of public subscription bonds in Macao, the new procedures shorten approval times, opening the door to new products that can be launched not only for professional investors, but for retail investors as well,” Bandeira said.

Olazábal of MdME agreed, noting that the time saved under this new arrangement can be significant, as the previous approval process could take weeks or even months, depending on the complexity of the issuance.

“Under the new registration system, the MCSD – the institution designated by the AMCM responsible for registration – has committed to providing a response within five business days, which offers efficiency that is particularly beneficial for frequent issuers and those looking to capitalise on favourable market conditions,” he said.

Macao is positioning itself as a place to facilitate RMB transactions and as a center for resolving disputes in deals involving Portuguese-speaking countries – Photo by humphery

Macao’s lusophone advantages

While the details about what needs to be disclosed under the new laws remain largely the same, the changes reduce the administrative work and allow legal professionals to spend more time on other important aspects of bond issuances, such as legal checks and risk assessment, Olazábal said.

This more efficient process complements Macao’s other advantages over Hong Kong’s larger investment community. Historical and cultural ties with Portugal provide a unique connection between China and Portuguese-speaking countries, Olazábal explained, helping to make communication and business deals smoother.

[See more: Macao and Hong Kong have linked their bond markets]

The use of both Chinese and Portuguese languages in legal and financial documents is another key benefit, positioning Macao to facilitate RMB transactions and serve as a center for resolving disputes in deals involving Portuguese-speaking countries.

“By leveraging Hong Kong’s deep RMB liquidity and Macao’s Lusophone connections, issuers gain access to dual investor pools, providing a more efficient and accessible platform for investors that facilitates cross-border investment and financing,” Olazábal said, underscoring that the efficiency gains are helping legal experts to allocate more attention towards compliance and managing legal risks.

This story was first edited by AI for clarity and conciseness, then manually checked by the writer and an editor before publication. ARTICLE BY Christopher Chu originally published by Macao News 18 March 2025