Core Viewpoint - The optimization of the "Swap Connect" mechanism aims to enhance market vitality and better meet the demand of foreign investors for managing RMB interest rate risks [1][2]. Group 1: Mechanism Optimization - The establishment of a dynamic adjustment mechanism for "Swap Connect" quote providers and the expansion of the quote provider team will lead to more diversified financial institutions offering competitive quotes, improving pricing efficiency and fairness [1]. - The daily net limit will be raised to 45 billion RMB starting from October 13, 2025, directly addressing the growing demand from foreign investors for RMB interest rate risk hedging [1][2]. Group 2: Market Impact - The Hong Kong Stock Exchange stated that the increase in the daily net limit not only expands the participation space for foreign investors in the RMB interest rate swap market but also enhances market liquidity and continues to promote the internationalization of China's domestic financial market [2]. - Since its launch on May 15, 2023, "Swap Connect" has become an important channel for foreign institutional investors to manage RMB interest rate risks, with over 15 countries and regions participating and completing more than 15,000 transactions totaling a nominal principal of 8.15 trillion RMB by the end of August 2025 [2]. Group 3: Future Outlook - There is significant potential for "Swap Connect" to expand its product range, continuously optimize mechanisms and processes, and strengthen risk prevention and regulatory cooperation in the future [3].

"中国的政策稳定性和科技创新进步，正吸引国际长线资金大规模涌入。"陈翊庭说，下一步，港交所将 优化制度安排，确保上市机制与时俱进，更好满足企业和投资者的多元化需求；在固定收益、大宗商品 等领域投入更多资源，适配全球资金多元配置需求；推动互联互通机制优化与标的扩容，进一步促进境 内外资本市场互联互通。 值得注意的是，9月22日，港交所宣布，在"北向互换通"下增加以一年期贷款市场报价利率为参考利率 的利率互换合约，以满足境外投资者多元需求。 供需两端双轮驱动 外资从被动进场到主动加仓 日前，港交所行政总裁陈翊庭在接受中国证券报记者专访时表示，全球资金多元化配置需求活跃，叠加 中国资产吸引力提升，正驱动外资对中国资产的投资逻辑从不能投转向不能不投。 包容性制度赋能创新 开放性市场汇聚活力 今年上半年，港交所交出靓丽"成绩单"：新股融资额达1094亿港元，重回全球交易所榜首；证券市场日 均成交额2402亿港元，同比上升118%；现货市场、衍生产品市场及沪深港通成交量均创半年新高。 对于港股热度是否具备可持续性，陈翊庭的答案是肯定的，而且信心满满。从供应端看，陈翊庭透露， 目前上市科正处理超过200家企业的上市申请，其 ...

Core Viewpoint - The Hong Kong Stock Exchange (HKEX) is witnessing a significant shift in foreign investment sentiment towards Chinese assets, moving from a stance of avoidance to one of necessity, driven by China's policy stability and technological advancements [1][3]. Group 1: Investment Trends - Foreign capital is increasingly viewing Chinese assets as essential, with a notable change in investment logic from "Anything But China" to "Buy China" [3]. - In the first half of the year, HKEX reported a new stock financing amount of HKD 1,094 billion, reclaiming the top position among global exchanges [2]. - The average daily trading volume in the securities market reached HKD 2,402 billion, a year-on-year increase of 118% [2]. Group 2: Supply and Demand Dynamics - The supply side is robust, with over 200 companies currently processing IPO applications, nearly half of which are technology firms [2]. - A significant highlight on the demand side is the substantial return of foreign capital, with foreign investors participating in 70-80% of certain IPOs [2][3]. - The shift in global asset allocation strategies, influenced by geopolitical tensions and trade protectionism, is prompting investors to diversify away from USD assets towards Hong Kong stocks [2][3]. Group 3: Institutional Innovation - HKEX is committed to optimizing its institutional framework to meet diverse financing needs, exemplified by the introduction of the 18A and 18C listing rules, which allow biotech and specialized technology companies to go public [5]. - The 18C rule has already seen three companies listed and over ten applications submitted, indicating growing market acceptance [5]. Group 4: Market Connectivity - The "A+H" listing model has created a positive feedback loop, with average trading volume for "A+H" companies in A-shares increasing by approximately 15% this year [6]. - HKEX aims to enhance its product offerings in fixed income, foreign exchange, and commodities to better compete with global markets [6]. - Future plans include expanding the range of products available through the Stock Connect, including ETFs and bonds, to facilitate greater market integration [6][7].

Core Viewpoint - The Hong Kong Stock Exchange (HKEX) is witnessing a significant shift in foreign investment sentiment towards Chinese assets, driven by the increasing attractiveness of these assets and the demand for diversified global capital allocation [1][2][3] Group 1: Investment Trends - Foreign capital is transitioning from a passive to an active approach in investing in Chinese assets, with a notable increase in foreign participation in IPOs, exemplified by a large domestic company's IPO where foreign subscription reached 70-80% [2][3] - The global asset allocation logic is changing, with investors moving away from USD assets due to geopolitical tensions and trade protectionism, leading them to consider Hong Kong stocks as a viable alternative [2][3] - The investment logic for foreign capital is shifting from "Anything But China" to "Buy China," indicating a growing confidence in Chinese assets [2][3] Group 2: Market Performance - HKEX reported impressive performance in the first half of the year, with new stock financing reaching HKD 109.4 billion, reclaiming the top position among global exchanges, and an average daily trading volume of HKD 240.2 billion, up 118% year-on-year [1][2] - The average daily trading volume for Hong Kong stocks is projected to rise from approximately HKD 1 billion in 2023 to HKD 1.3 billion in 2024, and further to HKD 2.4 billion in the first half of 2025, with foreign capital accounting for about 70% of the trading volume [3][4] Group 3: Institutional Innovation - HKEX is committed to optimizing its institutional framework to meet the diverse needs of enterprises and investors, with recent innovations such as the introduction of Chapter 18A and 18C allowing biotech and specialized technology companies to list without prior revenue [4][5] - The introduction of these new listing rules reflects HKEX's proactive approach to align with long-term investor demands and support early-stage financing for innovative companies [5][6] Group 4: Market Connectivity - The IPO boom in Hong Kong is positively correlated with the A-share market, with "A+H" listings creating a virtuous cycle between the two markets [5][6] - HKEX aims to enhance its product offerings in fixed income, foreign exchange, and commodities to better compete globally, as current offerings are limited compared to US markets [6] - Future plans include expanding the range of products available through the Stock Connect program, such as ETFs and bonds, to facilitate greater access for foreign investors [6]

Summary of Key Points from Conference Call Industry Overview - The conference call discusses the **government bond futures market** and its trading strategies, highlighting its role in risk management and investment opportunities [1][2][3]. Core Insights and Arguments - **Characteristics of Government Bond Futures**: - Features include short-selling mechanisms, margin trading, standardized contracts, and daily mark-to-market settlement, which help mitigate interest rate risks, lower transaction costs, enhance liquidity, and reduce credit risks [1][2]. - **Functions of Government Bond Futures**: - Key functions include hedging against interest rate fluctuations, price discovery, linkage between primary and secondary markets, and optimizing asset allocation [1][2][3]. - **Types of Government Bond Futures in China**: - China has introduced futures for 2-year, 5-year, 10-year, and 30-year government bonds, covering critical maturities. Each contract corresponds to different remaining maturity ranges, with longer maturities having wider price fluctuation limits and higher minimum margin requirements [1][4]. - **Basis and Net Basis**: - Basis is the difference between the cash bond price and the futures price adjusted for the conversion factor, serving as an important indicator for analyzing arbitrage opportunities. Net basis considers holding income, which is crucial for selecting the cheapest deliverable bond (CTD) [1][7][10]. - **Market Participants**: - Main participants in the government bond futures market include brokerage firms, asset management products (like public funds and private equity), individual investors, and some banks and insurance companies. The market has seen steady growth in trading volume and open interest since 2023 [5][6]. Additional Important Content - **Hedging Strategies**: - Hedging strategies include short and long hedges to manage interest rate risks. The process involves selecting contracts, calculating hedge ratios, dynamically adjusting positions, and managing rollovers [2][12][13]. - **Risks in Hedging**: - Risks faced during hedging include basis risk, financing spread volatility, and term mismatch risk. These risks arise from the imperfect correlation between the swap contract indicators and actual yields [17][27]. - **Interest Rate Swaps**: - Interest rate swaps are over-the-counter financial contracts that help manage interest rate risk by exchanging fixed and floating interest payments. They can also be used for speculation and cost reduction [21][22]. - **Arbitrage Opportunities**: - Arbitrage strategies in the futures market include directional trading and relative value strategies, such as term arbitrage and cross-asset strategies [19][28][29]. - **Risks in OTC Contracts**: - OTC contracts carry additional risks compared to exchange-traded contracts, including credit, operational, and valuation risks. Market risk arises if actual market conditions deviate from expectations [30]. This summary encapsulates the essential aspects of the government bond futures market and its associated trading strategies, highlighting both opportunities and risks for market participants.

Core Viewpoint - The Bond Connect has reached its eighth anniversary, showcasing significant growth in international participation in China's bond market and announcing new optimization measures to enhance cross-border investment opportunities [1][2][3]. Group 1: Market Growth and Participation - As of May 2025, over 1,169 international investors from more than 70 countries and regions have participated in China's interbank bond market, with foreign institutions holding onshore bonds worth 4.35 trillion yuan, reflecting a compound annual growth rate of approximately 12% over the past five years [1]. - In 2024, the total trading volume of the "Northbound" Bond Connect reached 10.4 trillion yuan, setting a new record, with a year-to-date trading volume of 4.66 trillion yuan as of the end of May, an increase of 205 billion yuan compared to the same period last year [3]. Group 2: New Optimization Measures - The People's Bank of China announced three new measures to enhance the Bond Connect, including improving the "Southbound" mechanism to allow more domestic investors to invest in offshore bond markets, expanding the eligible investor categories to include non-bank financial institutions [3][4]. - The optimization of offshore repurchase business mechanisms will facilitate liquidity management for foreign investors, allowing transactions in multiple currencies such as USD, EUR, and HKD, and simplifying operational processes [5]. - The "Swap Connect" will also be optimized to better meet investors' interest rate risk management needs, with plans to expand the range of products and adjust daily trading limits [5][6]. Group 3: Future Outlook - The Bond Connect is expected to continue serving as a bridge between China's bond market and international investors, promoting the diversification of onshore and offshore RMB product ecosystems [2][8]. - The Hong Kong Monetary Authority emphasizes the importance of these new measures in solidifying Hong Kong's role as an international financial center and offshore RMB hub, enhancing the liquidity of offshore RMB products [8]. - Industry experts anticipate increased inflows of foreign capital, particularly long-term funds, as China's bond market continues to develop and diversify [9].

Group 1 - The core viewpoint of the articles highlights that dovish signals from Federal Reserve officials and uncertainties in the Middle East are influencing traders' decisions in the financial markets [1] - Traders are heavily betting through the options market that the 10-year U.S. Treasury yield will drop to its lowest level since April, indicating complex economic logic and market dynamics [1][3] - A surge in demand for call options on 10-year U.S. Treasuries, particularly those expiring in August, has been observed, with at least $38 million in premiums accumulated recently [3] Group 2 - The recent spike in call options is driven by expectations that the 10-year Treasury yield could significantly decline from approximately 4.3% to 4% in the coming weeks [3] - A notable transaction involved a call option with a strike price of 113.00 (implying a yield of about 4%), costing nearly $10 million, reflecting traders' strong belief in a downward yield trend [3] - The increase in open interest for these options indicates a growing risk exposure in the market, with new long positions being established rather than closing existing short positions [3] Group 3 - Key drivers of this bullish hedge wave include signals from the Federal Reserve, with officials like Waller and Bowman showing support for potential rate cuts as early as July [4] - Despite Fed Chair Powell's cautious stance on monetary policy, traders have increased their bets on rate cuts, with market expectations for a July rate cut rising significantly [4] - Recent macroeconomic data, including unexpectedly weak consumer confidence, has supported traders' bets, pushing the 10-year Treasury yield below 4.3%, marking a new low since early May [5]

Report Industry Investment Rating No relevant content provided. Core Viewpoints of the Report - Negative carry risk has emerged as a significant challenge in the fixed - income investment field due to the global low - interest - rate environment and monetary policy cycle shifts. Overseas experience shows that addressing negative carry is crucial for institutional profitability, risk resistance, and financial system stability. China's asset management institutions can learn from overseas strategies to manage negative carry risks [10][15]. Summary According to the Table of Contents 1. Negative Carry: Impact in Progress - The cause of negative carry usually stems from asset - liability duration mismatch and interest - rate fluctuations. When the liability - side cost rises due to short - term interest - rate hikes or rigid payment pressure, and the asset - side long - term bond yields are locked or decline, institutions face the risk of return inversion [10]. - Overseas experience indicates that negative carry risks typically occur after a long - term low - interest - rate environment followed by a rapid interest - rate increase. For example, after the Fed's 2022 interest - rate hikes, the US banking industry faced "interest - rate increase + negative carry" pressure. In Japan, after the 2016 negative - interest - rate policy, a "interest - rate decrease + negative carry" situation emerged [10][11]. - China's banks and insurance institutions are also facing challenges of high liability - cost stickiness and low asset returns. They are forced to allocate low - yield bonds due to a shortage of high - quality assets, while liability - side costs adjust slowly [13]. 2. How Do Overseas Asset Management Institutions Break the Deadlock? 2.1 Asset - side: Increase Positive Returns - Japanese insurance institutions hedge negative carry pressure by extending asset duration and increasing ultra - long - term bond allocation, using term premiums to offset short - term return inversions [16]. - US commercial banks, with short - term deposits on the liability side, conduct band - trading by accurately predicting interest - rate cycles. They adjust their bond - asset repricing periods and use interest - rate swaps to hedge risks [21]. 2.2 Liability - side: Cost Control - European insurance institutions implement liability - duration matching strategies by issuing long - term policies or deposits to reduce liability - side interest - rate sensitivity. They lock in low - cost funds during interest - rate declines and adjust duration as interest rates change [22]. - Swiss insurance companies attract low - cost liabilities to form a liquidity buffer, using products like non - guaranteed products to reduce costs [24]. - Overseas asset management institutions use derivatives for duration matching and interest - rate risk hedging. For example, UK banks use structural hedging to improve returns and manage risks, and US insurance companies use interest - rate swaps to hedge interest - rate increase risks [30]. 3. What Strategies Can China Use to Address Negative Carry? - In China, banks face a contradiction between slow - growing deposit business and rigid costs, while asset - side fixed - income assets are highly sensitive to interest - rate fluctuations. The end of the negative carry environment depends on the interest - rate policy cycle [37]. - Strategies for China include dynamic duration adjustment, liability - side innovation and cost control, diversified asset allocation, and re - defining bond asset classifications. These strategies can help Chinese asset management institutions actively manage asset - liability linkages and reduce negative carry risks [38].

Core Insights - The "Swap Connect" has seen significant growth in trading volume, with daily transaction amounts increasing from approximately 3 billion RMB to over 22 billion RMB, marking a nearly sevenfold increase since its launch [1] - As of April 2025, 20 domestic quoting institutions and 79 foreign investors have participated, with over 12,000 transactions totaling a nominal principal amount of about 6.5 trillion RMB [1] - The People's Bank of China (PBOC) has introduced further optimization measures, including extending the interest rate swap contract duration to 30 years and expanding the product range to include swaps based on loan market quoted interest rates [1][2] Group 1 - The "Swap Connect" was officially launched on May 15, 2023, providing an efficient tool for managing RMB interest rate risks for domestic and foreign investors [1] - The extension of the interest rate swap contract duration is significant, as previous contracts rarely exceeded 5 years, aligning with the active trading characteristics of 10-year and 30-year government bonds [1] - The optimization measures are expected to enhance liquidity in the market and attract more institutions to participate, catering to diverse trading strategies of foreign investors [1] Group 2 - Previous optimization measures were implemented in May 2024, which included contract compression services and the introduction of swaps with international currency market settlement dates [2] - The ongoing optimization of the "Swap Connect" mechanism is anticipated to promote collaborative development between the financial derivative markets of mainland China and Hong Kong, reinforcing Hong Kong's position as a preferred offshore RMB market for international investors [2] - The PBOC aims to continuously improve related mechanisms to steadily advance the opening of China's financial markets and support the prosperity of Hong Kong as an international financial center [2]

Group 1 - The People's Bank of China, the Hong Kong Securities and Futures Commission, and the Hong Kong Monetary Authority announced enhancements to the "Swap Connect" product types, which were welcomed by the Hong Kong industry [1] - The optimization measures include extending the interest rate swap contract duration to 30 years and introducing interest rate swap contracts referencing the Loan Prime Rate (LPR) [1] - The Hong Kong government supports the continuous optimization of the "Swap Connect" mechanism, aiming to promote the coordinated development of financial derivative markets between mainland China and Hong Kong [1] Group 2 - Bank of China (Hong Kong) stated that the optimization measures will provide greater operational space and diverse options for overseas investors in managing RMB interest rate risks [2] - The Hong Kong Stock Exchange plans to collaborate with the China Foreign Exchange Trade System and the Interbank Market Clearing House to further enrich the product duration and types under "Swap Connect" [2] - The initiatives are expected to enhance the attractiveness of the domestic RMB interest rate derivatives and RMB bond markets [1][2]