As Macao attempts to kickstart its financial sector as part of efforts to diversify the economy away from reliance on casinos, the local bond market has hit what Bloomberg described as “a record amount of bond listings.”
Some 63 percent of the US$28.1 billion-worth of bonds listed this year on the Chongwa Financial Asset Exchange Co – the local exchange better known as MOX – have been yuan-denominated, mainly issued by local government financing vehicles in the mainland. That’s a massive increase since the MOX opened in 2018, when listings totalled slightly over US$600 million.
Current figures indicate Macao’s bond listings equate to about 26 percent of Hong Kong’s, up from about 3.8 percent in 2020. According to Bloomberg, initiatives such as making debt registration cheaper and simpler than at major Asian financial centres – like Hong Kong and Singapore – have helped Macao’s bond market grow. Future increases should flow from a new securities law that authorities are working on, and a strategic cooperation agreement with Luxembourg’s stock exchange.
[See more: Macao and Hong Kong are linking their bond markets]
The executive director of Macao’s Monetary Authority, Henrietta Lau, told Bloomberg that while the SAR’s bond market was “still at the nascent stage,” the aim was to transform it into “a financing bridge between the mainland and the outside world.”
Zerlina Zeng, head of East Asia corporate research at Creditsights Singapore LLC, noted that the central government intended to “develop Macao into one of the key bond listing venues in Asia, especially for offshore [yuan] bonds and free trade zone bonds.” She added that local governments across the mainland and state-owned-enterprises were being encouraged to support these.
Challenges to the market’s growth include the fact that debt structuring, sales, clearing and settlements “in many cases still occur outside of Macao”, according to Bloomberg. The lack of a dynamic secondary market is seen as another hurdle.
