Keynote speech at the ICMA “The Asian International Bond Markets: Development and Trends” Report Launch Event

Bryan, Mushtaq, Andy, Distinguished panellists, Ladies and gentlemen:

1. Good afternoon.
2. It is a great pleasure to join you today for presentation of the latest ICMA report on Asia’s international bond markets.
3. On behalf of the Hong Kong Monetary Authority, let me first congratulate ICMA on another year of success in publishing this report. I would also like to thank their dedicated efforts in keeping us abreast of the important trends and developments in the regional bond market. 
4. This is the third year that ICMA publishes this report. After two years of virtual presentations, I am very excited to see this event taking place physically for the first time. 
5. The year 2022 was a difficult year for the global bond market. Market sentiment was affected by rising inflation and interest rates, uncertain macro-economic outlook, and heightened geopolitical tensions.  The Asia market was no exception.  In line with the global trend, the annual issuance volume of international bonds in the region declined by more than 40% in 2022, back to the 2015 level. 
6. Despite all these challenges, there have been a number of bright spots as highlighted in the report.
7. First is the continued growth in green and sustainable finance in Asia, and the resilience of the green segment relative to the broader market slow down last year.
8. More specifically, as a proportion of overall issuances, green and sustainable issuances notably increased to 23%, from 16% in the previous year. Geographically, the uptake was broad-based.  An increased proportion of green issuances was observed in Mainland China, South Korea, India, Malaysia as well as Hong Kong. 
9. Second is the continued impetus to the regional market from Chinese offshore issuances. Notwithstanding the challenges to the Chinese real estate sector in the past two years, China remained the largest source of international issuance in Asia. 
10. As the ICMA report has suggested, a number of factors have contributed to the significant growth in international issuance by Chinese issuers over the years, namely, to cater for overseas operational and financing needs, to diversify fundraising channels, and to broaden the investor reach.
11. More recently we start to see the footprint of local government issuers. The governments of the Shenzhen municipality and Hainan province debuted their offshore bond issuances during 2021 and 2022 respectively.   
12. The investor base is also growing. With Bond Connect extending from Northbound to Southbound, the offshore market is opened up as an alternative channel to reach onshore investors. 
13. Hong Kong has a natural edge in arranging these Chinese issuances. This put us at the top spot, for 7 consecutive years including 2022, in terms of arranging Asia’s international issuances.  We arranged one-third of the region’s overall issuances, as well as green issuances.
14. The regional bond market has started the year of 2023 with much improved sentiment. Here in Hong Kong, the Government came to market in the very first week of January with the largest ESG bond issuance in Asia.  The bonds were well received by global investors. 
15. We are mindful that the market will continue to face uncertainties. Just in recent weeks, events in the banking sector sent shock waves across the global capital markets.  And market participants need to stay vigilant.
16. At the same time, it is equally important that we position ourselves well for opportunities that may arise.
17. One key development is digitalisation. The ICMA report highlights the accelerating and mainstreaming of technology adoption in Asia’s bond markets.  Indeed, in recent years both the public and private sectors have done digital bond projects of varying scale to explore how distributed ledger technology (or DLT) may enhance market efficiencies. 
18. In Hong Kong, we also did our first tokenized government green bond issuance last month, which was also the first of its kind globally. It proves our capacity in providing a flexible and favourable legal and regulatory environment for innovative forms of bond issuance.  Reflecting on the experience gained through this issuance, we are engaging with market participants to map out the next steps of the project.
19. With that, we look forward to hearing ICMA’s key findings and the panelists’ insightful sharing.
20. Thank you ICMA, and once again congratulations on the launch of the report. I wish you all a fruitful event ahead.