“It is important to enhance the interconnectivity between the Macau bond market and the world”

Macau Business | December 2021

MOX Executive Director and Vice President Tenny Ruan underlines the rapid expansion of the city’s bond market over the past couple of years. Financial innovation, stronger ties with national and overseas partners and the joint development of Hengqin are the way forward.

Despite being at the beginning stage, the Macau bond market has been quickly expanding in the past three years with the inception of Chongwa (Macao) Financial Asset Exchange Co. Ltd (MOX), the city’s only institution to facilitate bond issuances and listings. In an interview with Macau Business, Tenny Ruan, Executive Director and Vice President of MOX, shares what the institution has achieved since its establishment, including partnerships with domestic and overseas financial institutions, adding the updates of the financial legal infrastructure and incentive measures could further advance the development of the local bond market. Like other industries here at the moment, the nearby Hengqin Island also boasts new opportunities for the local financial segment.


Macau Business (MB): Chongwa (Macao) Financial Asset Exchange Co. Ltd (MOX) is celebrating its third anniversary on 12 December. Could you briefly share with us what MOX has achieved in the past three years? 
Tenny Ruan (TR): Bonds have been the core business of MOX since its inception in December 2018, and it has collaborated with different market players to guide bond issuances and listings in Macau by domestic and foreign issuers. As of 18 November 2021, there were 85 bond issuances/listings by 57 issuers on MOX in a total value of about MOP258.1 billion (US$32.26 billion). Among the issuances/listings, 50 were denominated in the United States dollar in a total of US$24.5 billion (MOP196 billion); 19 were denominated in yuan in a total of RMB32.5 billion (MOP40.94 billion); six were denominated in the Hong Kong dollar worth HK$11.8 billion; six were denominated in the Macau pataca totalling MOP9.4 billion; [and others].
A rapid growth has been achieved in terms of the number and scale of bond issuances/listings on MOX in the past three years — the compound growth rate was 205 per cent in the number of bond issuances/listings, while the compound growth rate was 275 per cent in the scale of bond issuances/listings.

Are you satisfied with what MOX has achieved so far concerning the development of the local bond market?
T.R. –With the support from the Macau SAR Government and the regulator, as well as the efforts from different market players, MOX — the city’s first financial institution to provide services of bond registration, custody, listing, trading and settlement — could gradually promote the development of the Macau bond market following establishment less than three years ago. MOX has made active efforts and contributions to the exploration of a differential path for the development of Macau’s modern financial industry. As part of the MOX family, I am grateful and proud of this journey, an important chapter in my career. 

Which entities have issued or listed their bonds on MOX so far?
T.R. –The issuers that have registered and listed their bonds in Macau include: the Ministry of Finance of the People’s Republic of China; the People’s Government of Guangdong Province; Luso International Banking from Macau; Bank of China; Industrial and Commercial Bank of China; provincial and municipal state-owned firms like Fujian Investment & Development Group and Zhuhai Huafa Group; and Macau gaming operators like SJM Holdings Limited.   

The Guangdong provincial government issued offshore bonds in the city this October with a size of about RMB2.2 billion. Could you tell us what is the significance of this issuance for the local bond market? 
T.R. –This marks the first time for the municipal authorities from Mainland China to issue offshore bonds here. It represents another milestone for the development of the Macau bond market following the Ministry of Finance’s inaugural issuance of sovereign bonds in the city in 2019. The Macau bond market is now at the stage of “starting from scratch and then making advancements”. The pilot bond issuance by the Guangdong provincial government in Macau this time has adopted the bookkeeping system of MOX, which has also taken up multiple roles in the process — namely, registration, custody, listing, trading and settlement — effectively advocating the gradual improvements of the local financial infrastructure. Besides, there were 15 underwriters for this issuance, including eight Macau financial institutions, while the paying agent and trustee were also Macau financial institutions. These all pragmatically help optimise the local bond issuance process. 

“We look forward to the set-up of a market-oriented mechanism with the gradual improvement of regulations to expedite the integrated development of the Macau bond market with nearby regions.”


In addition, this issuance has been highly recognised and well received by the international capital market with subscriptions from investors around the world. Apart from Macau, investors from Hong Kong SAR, Brazil, Australia, Japan, Taiwan region and other countries and regions have also made subscriptions. These help align the mainland provincial government bond segment with the world, as well as facilitate the healthy development of the Macau bond market. 

MOX has also strived to forge different types of partnerships in the past three years, such as the cooperation between MOX and Luxembourg Stock Exchange (LuxSE). What has been achieved so far through the partnership with LuxSE? How could it benefit MOX and the local bond market? 
T.R. –The largest equity exchange for bonds in Europe with over 37,000 bond listings and involving more than 50 currencies, LuxSE is influential in both the European and global capital markets. Following the signing of a memorandum of cooperation between MOX — a financial institution focusing on the bond business — and LuxSE in January 2020, both sides have kept strengthening business exchanges and promoting dual listings of bonds on both exchanges. An innovative one-stop business model for dual listings on MOX and LuxSE was created this year: on the heels of the listing on MOX, issuers can opt for the “one-stop dual listing” service to have their bonds listed in both the Macau and European markets at the same time […], offering a diversified listing proposal for issuers. At this moment, the US$400-million, five-year senior fixed rate notes of Sichuan Development Holding Co. Ltd, and the US$400-million, three-year senior unsecured notes of Beijing Infrastructure Investment Co. Ltd have been listed on both exchanges through the service.


The successful examples of these dual listings on both MOX and LuxSE […] mark a new chapter for the financial cooperation between Macau and Luxembourg. Looking forward, MOX will continue to seize opportunities for cooperation with LuxSE in the areas of bonds, green finance and others, attracting more quality domestic and overseas firms to pay attention to, and come to Macau.  



Besides the cooperation with LuxSE, is there any more partnership with overseas equity exchanges on the pipeline?
T.R. –We have to acknowledge the differences between Macau, a new [bond] market, and matured financial markets. Macau has a lot to learn from and draw on the experiences from developed overseas equity markets and the robustly developing equity markets in Mainland China. Therefore, what MOX needs to do is to keep absorbing the advanced experiences from the domestic and overseas [financial] markets to improve the financial industry of the city and elevate the development of Macau modern financial service to the next level.
Our cooperation with LuxSE is a good example of our constant exchanges with overseas bond registration and custody institutions, equity exchanges, financial institutions and various professional groups. MOX will actively seek to carry out cooperation with the leading markets in Asia and Europe, incorporating their successful recipes for the diversification of the Macau modern financial service.

Talking about the financial development of Macau, we often say the local regulations have to be updated to accommodate the latest financial trends and progress. The Macau government is now preparing to amend the Macau Financial System Act, dated 1993, and draft new laws on equities, funds and trust. What’s your take on what has to be done to improve the existing rules regulating the bond market?
T.R. –The existing regulations governing the Macau bond market are the Commercial Code, the Macau Financial System Act and the relevant guidelines issued by the Monetary Authority of Macau. As the Macau bond market is still at the starting stage, the relevant legal infrastructure has to be constantly polished with optimised guidelines and business specifications. For instance, […] Article 496 of the Commercial Code on the issuance of bonds requires that a company may issue bonds if all its members are joint-stock companies […]; the Commercial Code mandates the local bond issuance has to be in paper form; Article 3 of the Macau Financial System Act on the issuance of bonds requires that should any entity in Macau issue bonds it must first acquire authorisation beforehand from the Chief Executive, who will consider the opinions from the Monetary Authority of Macau. These all could be further ameliorated. We look forward to the set-up of a market-oriented mechanism with the gradual improvement of regulations to expedite the integrated development of the Macau bond market with nearby regions.

What else could be done in the future to further advance the Macau financial industry?

T.R. –The Macau financial industry has been lacking diversification, in terms of both market structure and types of entities, with the shortage of driving forces for development. As of end-2020, besides 30 banks and 25 insurers, there was only one financial firm for asset management services, two financial intermediary firms for securities brokerage service, two financial leasing companies and one financial asset trading company, while the others were small entities of money exchange and cash couriers. We suggest Macau could introduce more market players like investment banks, fund companies and asset management companies to jointly develop the local financial market.
Cost and efficiency are among the major considerations whether issuers will issue bonds in Macau. The city could learn from the incentive policies of the nearby markets, such as the Pilot Bond Grant Scheme of Hong Kong and Global-Asia Bond Grant Scheme of Singapore, providing tax breaks for companies issuing bonds in the city as well as subsidising their issuance and listing costs. These could help Macau attract more quality firms for bond issuances. 

“A rapid growth has been achieved in terms of the number and scale of bond issuances/listings on MOX in the past three years.”


The interconnectivity between the Macau bond market and the counterparts in Mainland China and abroad could also be strengthened, attracting more investors participating in the local bond market. Concerning the interconnectivity with the mainland bond market, MOX has explored various fields. During the issuance of sovereign bonds in 2019, MOX established partnership with China Central Depository & Clearing Co. Ltd (CCDC) in the mainland, facilitating the free trade zone bonds that are registered in CCDC and listed in Macau. MOX’s “Gateway to the Chinese Bond Market” came online in December 2020, allowing the information about bond issuances in the mainland to be revealed and displayed in Macau through CCDC. The “CCDC-MOX Bond Information Platform” was also launched, which included five Chinese bond indexes in the first phase, providing more Chinese bond price reference benchmarks for international investors and Macau investors while building an efficient and transparent channel for international investors to access the information of the Chinese bond market. Nowadays, over 260 bonds in a total scale of RMB2 trillion are displayed at the “Bond Information Platform”.
The awareness and participation of the global investor community in the Macau bond market has been on a hike. Thus, it is important to enhance the interconnectivity between the Macau bond market and the world to expand the pool of investors for the city and resolve the problem of liquidity in the secondary bond market. [Note: Secondary bond market is the marketplace where investors trade previously issued bonds, compared with the primary market where issuers sell bonds to the public for the first time.]


Green financing is also on your agenda…

T.R. –For sure, MOX has also been committed to green and sustainable financial development, successfully attracting the issuances/listings of nearly MOP50-billion green or sustainability bonds. MOX also established a partnership with the Climate Bonds Index in July 2021, the first Macau financial institution to do so […]. In addition, MOX will use bonds that support long-term project financing as a starting point for green and sustainable financial development. 
The Policy Address for 2022, which has recently been published, mentions “[the city] will advocate the modern financial development in a pragmatic manner, accelerate the cultivation of bond market, develop wealth management and finance leasing businesses, develop [Macau] as the centre for cross-border yuan settlement centre, …, revise the Macau Financial System Act, remove the current approval system for bond issuance and introduce a new license type of investment banking.” There is more content covering the financial industry and bond market in the Policy Address, but the content I have mentioned have already responded to some of the problems arising from the development of the Macau bond market that we have just discussed. Therefore, I believe we could purposefully resolve any problems, keep improving and achieve more breakthroughs with the guidance and support from the SAR Government.

“The city could learn from the incentive policies of the nearby markets, such as the Pilot Bond Grant Scheme of Hong Kong and Global-Asia Bond Grant Scheme of Singapore, providing tax breaks for companies issuing bonds in the city as well as subsidising their issuance and listing costs.”

With the recent inauguration of the Guangdong-Macau In-depth Cooperation in adjacent Hengqin Island, how could Hengqin — deemed as a platform for the diversification of the city’s economy — help bolster the local financial development? 
T.R. –The development plan of the Guangdong-Macau In-depth Cooperation Zone, published by the Communist Party of the China Central Committee and the State Council in September 2021, states the modern financial industry as one of the development directions of the zone with support for six goals. They are: supporting the zone to be a financial service platform between China and Portuguese-speaking countries; supporting the establishment of multi-currency venture capital funds and private equity investment funds in the zone for the high-tech and innovative industries; supporting the zone to undertake cross-border yuan settlement service; supporting Macau to develop wealth management, bonds, financial leasing and other areas of modern financial industry in the zone; supporting Macau-backed financial institutions to set up banks and insurers in the zone; supporting the start of cross-border motor vehicle insurance, cross-border medical insurance and letter of credit insurance businesses in the zone. 
I believe the development of the in-depth cooperation zone will inject new momentum to the long-term development of the Macau modern financial industry.


Would MOX consider setting up an office in Hengqin? 
T.R. –In light of the MOX development, we definitely need to set up an office in Mainland China and Hengqin is one of the locations that we will first mull over.

Besides bonds, what are the other types of products and services MOX plans to cater? 
T.R. –Apart from bond products, another type of products that MOX has been granted regulatory approval to carry out is offshore transactions of state-owned assets, providing open and transparent service for trading of equity interests, fund shares, capital and share increase of offshore state-owned enterprises. In the future, MOX will continue to complement and improve its trading products and types, and actively explore the introduction of bond exchange-traded funds (ETFs), real estate investment trust (Reits), asset-backed securities (ABS) and other products to Macau in accordance with the regulatory approval and market conditions. 

And lastly, what is the future plan for MOX? 
T.R. –
Looking ahead, what MOX has to do is to stay true to its original aspirations. We will continue to focus on the bond business and cooperate with the strategic plan of the Macau SAR government, enriching our product types and enhancing the credibility and brand influence of MOX. With due commitments to the financial market, MOX will continue to facilitate the development of the financial industry as a driving force for the economic restructure of Macau. We are prepared to serve as “a trailblazer” for a long time, as we understand that it takes time to nurture and develop an emerging market. But we firmly believe that the Macau financial industry will eventually become a new namecard of the city.