债券“南向通”扩容下的境外债投资机会分析

Report Industry Investment Rating No information provided in the report. Report's Core View - The scope of domestic investors in the Bond "Southbound Connect" may be expanded to four types of non - banking institutions, namely securities firms, funds, insurance companies, and wealth management institutions. The annual quota may be increased from RMB 50 billion to RMB 100 billion. This improvement in the mechanism helps investors have more asset investment options and alleviates the asset shortage to some extent [1][5][8]. - Based on the understanding of enterprise fundamentals by domestic investors, they can actively focus on the investment opportunities of overseas bonds of domestic enterprises traded in the Hong Kong market. It is recommended to pay attention to urban investment dim - sum bonds and investment opportunities in various industries of Chinese - funded US dollar bonds [5][32]. Summary According to the Table of Contents I. Bond "Southbound Connect" Overview: Definition, Existing Institutional Arrangements, Investment Entities, and Quota Usage - Definition: It refers to the mechanism arrangement where domestic investors invest in bonds traded and circulated in the Hong Kong bond market through the interconnection of relevant basic service institutions in the Mainland and Hong Kong in bond trading, custody, and settlement [2][8]. - Institutional Arrangements: - Target Bonds: All bond types issued overseas and traded in the Hong Kong bond market [2][9][16]. - Domestic Investor Scope: Currently, it is tentatively limited to some primary dealers in the open - market operations recognized by the People's Bank of China. Qualified Domestic Institutional Investors (QDII) and Renminbi Qualified Domestic Institutional Investors (RQDII) can also conduct overseas bond investments through the "Southbound Connect" [2][9][18]. - Trading Currency: Domestic investors can use RMB or foreign exchange. The funds can only be used for bond investment. When using RMB to invest in foreign - currency bonds, investors can handle foreign - exchange conversion and hedging in the inter - bank foreign - exchange market. After the bonds mature or are sold, if investors do not continue to invest, the funds should be remitted back to the Mainland and converted back to RMB. Illegal currency arbitrage through the "Southbound Connect" is prohibited [15][18]. - Quota Limit: The upper limit of the net cross - border capital outflow of the "Southbound Connect" does not exceed the annual quota and the daily quota. Currently, the annual quota is RMB 50 billion equivalent, and the daily quota is RMB 20 billion equivalent. The net cross - border capital outflow of QDII and RQDII participating in the "Southbound Connect" is not included in the quota statistics [3][15][18]. - Investment Entities: - Primary Dealers in Open - Market Operations: 41 bank - type financial institutions in the 2020 annual open - market operations of the People's Bank of China [9][10]. - QDII: As of the end of June 2025, 191 institutions have obtained QDII quotas, with a total of USD 170.869 billion. The quota growth has gradually slowed down [13]. - RQDII: They can independently decide to conduct securities investment overseas without quota restrictions [14]. - Quota Usage: As of the end of May 2025, Shanghai Clearing House held 918 "Southbound Connect" bonds through the financial infrastructure interconnection model, with a total balance of RMB 532.94 billion, a year - on - year increase of 21% [3][18] II. Analysis of the Current Situation of the Overseas Bond Market: Dim - Sum Bonds and Chinese - Funded US Dollar Bonds (1) Dim - Sum Bonds - As of July 9, 2025, there were 1,734 outstanding dim - sum bonds with a total balance of RMB 1,419.7 billion. Financial bonds accounted for 47% (RMB 663.2 billion), followed by urban investment bonds and government bonds, accounting for 24% and 18% respectively [4][22]. - The issuing entities of outstanding dim - sum bonds are mainly of medium - to - high grades. Over 80% have a remaining term of less than 3 years. Among them, about 45% of the issuing entities have no relevant ratings, and among those with ratings, AAA and AA+ entities account for 37% and 12% respectively. In terms of remaining terms, those within 1 year and 1 - 3 years account for 40% and 42% respectively [25]. (2) Chinese - Funded US Dollar Bonds - As of July 9, 2025, there were 2,227 outstanding Chinese - funded US dollar bonds with a total balance of approximately USD 72.5 billion. Industrial bonds and financial bonds accounted for a relatively high proportion, 38% and 31% respectively, followed by real - estate bonds (17%) and urban investment bonds (10%) [4][28]. - The issuing entities of outstanding Chinese - funded US dollar bonds are mainly of high grades, and about 61% have a remaining term of less than 3 years. About 38% of the issuing entities have no relevant ratings, and among those with ratings, AAA entities account for about 50%. In terms of remaining terms, those within 1 year and 1 - 3 years account for 25% and 36% respectively [32]. III. Focus on Investment Opportunities in Overseas Bonds under the Expansion of the Bond "Southbound Connect" - Investment Opportunities in the Primary Market: Chinese - funded overseas bonds have relatively high coupon yields. The coupon yields of urban investment bonds in outstanding dim - sum bonds are generally 100 - 300 BP higher than those of domestic bonds, and the coupon yields of various industries of Chinese - funded US dollar bonds are generally 50 - 300 BP higher than those of domestic bonds [5][33]. - Investment Opportunities in the Secondary Market: Chinese - funded overseas bonds have obvious excess spreads compared with domestic bonds. The spreads of dim - sum bonds are mostly within 100 BP, and those of Chinese - funded US dollar bonds are mostly above 200 BP [5][36]. - Specific Investment Recommendations: - Urban Investment Overseas Bonds: There have been no substantial default cases of domestic and overseas bonds of urban investment entities in China. It is recommended to choose bonds with a term of less than 3 years, a yield of over 4%, a subject rating of AA+ or above, and a bond balance of over RMB 300 million or USD 300 million. There are 68 eligible urban investment dim - sum bonds with a total balance of RMB 53.8 billion and 75 US dollar bonds with a total balance of USD 28.2 billion [38]. - Industrial US Dollar Bonds: Focus on central and state - owned enterprise bonds, pay attention to the allocation opportunities of US dollar bonds in industries such as petroleum and petrochemicals and public utilities, and avoid weak - quality private enterprise bonds. It is recommended to choose central and state - owned enterprise US dollar bonds with a term of less than 3 years, a yield of over 4%, a subject rating of AA+ or above, a bond balance of over USD 300 million, and in industries such as transportation, public utilities, and petroleum and petrochemicals. There are 39 such bonds with a total balance of USD 26.8 billion [39]. - Financial US Dollar Bonds: The issuing entities are mostly state - owned financial institutions, and the bonds are relatively safe and liquid. It is recommended to choose financial US dollar bonds with a term of less than 3 years, a yield of over 4%, a subject rating of AA+ or above, and a bond balance of over USD 300 million. There are 86 such bonds with a total balance of USD 54.2 billion [40].