A gateway to international capital markets: Insights from DFZQ and SHCH
In this interview, DFZQ and SHCH share their perspectives on accessing international investors through Shanghai FTZ bonds and listing at LuxSE.
Together, they reflect on the opportunities unlocked by entering international capital market, the challenges associated with Shanghai FTZ bonds and the supporting settlement infrastructure.
Could DFZQ briefly describe itself and could SHCH explain its role in the FZT bond issuance and settlement process?
DFZQ: DFZQ is a comprehensive securities company established under the China Securities Regulatory Commission (CSRC)’s approval. The company is dual listed on the Shanghai and Hong Kong stock exchanges (A+H), and provides securities, futures, asset management, investment banking, investment consultancy and securities research. It holds investment-grade ratings of Baa2 (Moody’s) and BBB-(S&P). With branches in Hong Kong and Singapore, DFZQ serves global clients with integrated financial solutions.SHCH: SHCH acts as the registrar and issuer Central Securities Depository (CSD) for Shanghai FTZ offshore bonds. We provide one-stop services for issuers, including ISIN code application, local code allocation, bond issuance and registration, income payment and redemption services. In addition, SHCH supports overseas investors to invest in FTZ bonds either through direct accounts with SHCH or through omnibus account structure, offering end-to-end services such as custody, settlement, and corporate actions. This further expands the financing channels for "Going Global" enterprises and companies from countries and regions participating in the Belt and Road Initiative (BRI) and provides international investors with diversified asset allocation options.
What motivated DFZQ to enter international markets with a FTZ bond at LuxSE and what has investor interest and market response been?
DFZQ: This issuance-the market’s first cross-border guaranteed FTZ offshore bond from a non-bank financial institution-represents a step in diversifying DFZQ’ international funding channels and exploring cross-border RMB financing. Listing on LuxSE leverages its established international platform to enhance visibility, broaden investor access, and support the development of the FTZ offshore bond market.
The bond attracted active subscription from high-quality international investors in regions such as Hong Kong and Singapore, reflecting solid market interest in DFZQ’ credit profile and high-quality RMB assets as well as the innovative FTZ offshore bond product.
What has been SHCH's experience so far with cross-border bond settlements?
SHCH: Focusing on the role as a financial market infrastructure, SHCH facilitates the safe and efficient operation of cross-border custody and settlement, and promotes the connection between the internal cycle of the China bond market and the external cycle of the international market.
On one hand, SHCH continuously makes efforts to align China interbank bond market (CIBM) services with international practices. For instance, SHCH constantly optimises services for overseas investors to access CIBM, supporting issuers in applying for ISIN codes with accelerated allocation process, offering recycling settlement and flexible settlement cycle options.
On the other hand, SHCH is actively exploring interconnection with overseas financial market infrastructure. SHCH has collaborated with Hong Kong CMU (Central Moneymarkets Unit) to support the bilateral transactions (Northbound and Southbound) of Bond Connect, providing domestic and overseas investors with a new channel for the single-point entry to the cross-border bond market based on the institutional arrangement of "nominee holding and omnibus account structure". Simultaneously, SHCH has also carried out cross-border cooperation with various overseas financial market infrastructures such as Euroclear Bank and LuxSE, promoting the connection between domestic and international markets.
How does SHCH support international investors participating in bonds listed on LuxSE?
SHCH: SHCH provides infrastructure support for bond products, including financial bonds, Panda Bond, Yulan Bond, FTZ Bond, which are listed on LuxSE, and registered and held with SHCH. Specifically:
- Supporting the diversification of CIBM access channels for overseas investors, such as CIBM Direct, QFII/RQFII, Bond Connect, and cross-border counter channels. Investors are also allowed to freely choose to invest in offshore bonds such as Yulan Bond and FTZ Bond via direct account with SHCH or sub-custodians.
- Eliminating language barriers by promoting the translation of service information including business rules, guides and receipts into English.
- Aligning with international operational standards, supporting issuers of all types in applying for ISIN codes, thereby facilitating overseas investors' participation in the primary market issuance and secondary market trading.
- Optimising trading and settlement mechanisms by launching settlement recycling, flexible settlement cycle arrangements, and supporting the extension of trading hours.
What would DFZQ and SHCH recommend to potential issuers when considering FTZ bonds?
DFZQ: We advise potential issuers to focus on understanding the relevant policy framework, make use of mature market infrastructure such as LuxSE and SHCH, and maintain transparent communication with market participants. Each issuance can help build a track record and long-term market credibility.
SHCH: SHCH will research and promote more FTZ bonds to be issued. In the future, SHCH will enrich product types and expand the scope of investors, to support the sustainable development of the business. SHCH will support issuers to flexibly choose to issue bonds denominated in RMB and other currencies, as well as continue to explore and promote the connections with trading platforms to provide diversified trading and settlement channels. Based on the omnibus account structure, SHCH will promote connections with global custodian banks and overseas CSDs, to provide more convenient infrastructure services for FTZ Bond issuers and investors.
