Special Report – Bond, the future is bond

The government’s bet was to create a bond market in Macau. Is the idea compatible with a stock exchange (NASDAQ style) in Hengqin, or not? For now, pursuant to the preliminary results of research, conducted by the appointed international consulting firm, “it has been basically concluded to develop securities business with bonds as its priority.”

MB April 2021 Special Report | Financial Hub in the making

It’s understandable that the announcement made last November for a securities market in Hengqin, and NASDAQ-style, in Macau, created some disturbance in government and in the regulation of the MSAR financial sector.

Until then, all efforts had been directed to creating a bond market, not a stock market (with listed companies and stock trading).

Six months before this announcement, during the presentation of the Policy Address, the Secretary for Economy and Finance said that the financial sector has “objective conditions that contribute to the horizontal diversification” of the economy. The focus, Lei Wai Nong added, should be on the bond market, wealth management and leasing: “the goal is to create an active secondary market as quickly as possible”.

And at the end of November that year, after the National Development and Reform Commission of China announced the plans to create a stock exchange in Macau/Hengqin, Secretary Lei stated that the priority hadn’t changed: “First, let’s do the jobs we have confidence in, which is the bond market. We cannot rule out all the odds, we have to reinforce the work that can create a good future for Macau,” he noted.

The local government’s idea is to create a securities market positioned differently from the Hong Kong and Shenzhen markets, so stock trading seems like a bad idea.

“Macau has to look for the differences and similarities with other regions. We have to think very carefully where the Macau market is. We have to take advantage of the ‘One Country, Two Systems’ principle and the free port policy, because if Macau’s market is the same as the others, what will be the difference? Why are they going to want to invest in Macau?”, Secretary Lei defended.

In line with these ideas, the last Policy Address (for 2021, discussed in… November) raises the need for “developing physical spaces for negotiating bonds. We have to continue working so that our bonds market can have sustainable development.”

As long as China does not clarify what it wants, either directly or through the Government of Macau, the current uncertainty will prevail: does creating a financial center in Macau include a stock exchange, probably inspired by the NASDAQ model, or not?

And if the Macau Government prefers to play defensive, there are those who understand that it can and should be more daring.

“Macau has the conditions to establish a stock exchange,” states Lin Deqin, Professor at City University of Macau and one of the most knowledgeable researchers in this area. “Bonds are one of the businesses that the Macau Stock Exchange can vigorously develop,” he said.

“The creation of a local stock exchange is an almost necessary condition for the development of a large and efficient financial infrastructure and the fostering of economic diversification” – a position argued recently by two local lawyers, Paulo Câmara and José Leitão, in our sister publication Macau News Agency.

“Given HKEx is quite a successful one globally, to set up another stock exchange in Macau may not be a good idea unless this stock exchange will cater for a large (i.e., ‘profitable’) market segment that is different from that of HKEx” – Adrian Cheung

A decision will have to be made in the coming months, because developing a bond market is not incompatible with, but it is quite different from, a stock exchange. “I would consider a financial system based on a government and corporate bond market as an initial step on this RMB denominated exchange in Macau,” states Sérgio Gomes, University of Saint Joseph. “However, a bond market would not be enough to develop Macau as a potential financial center. A second stage that would include an equity market, even if more focused on tech-oriented business, could lead towards an important role that a financial center in Macau could play in the Greater Bay Area corporate development,” he said to Macau Business.

Adrian Cheung, City University of Macau, also urges caution: “It is possible to design a securities market without a stock exchange. It depends on what kind of securities we want to focus on and what mechanism (exchange vs Over-the-Counter) we want to use. My view is that given that HKEx is quite a successful one globally, to set up another stock exchange in Macau may not be a good idea unless this stock exchange will cater for a large (i.e., ‘profitable’) market segment that is different from that of HKEx.”

The Government, via AMCM, tells Macau Business: “With regard to the bond market, pursuant to the preliminary results of research conducted by the appointed international consulting firm and combined with previous study by the MSAR Government, it has been basically concluded to develop securities business with bonds as its priority.”

“Hence, the forefront of our work is to commence the set-up of a ‘Central Securities Depository’ system in Macau, as well as to enhance the relevant legal framework of the bond market,” adds AMCM. “In the meantime, the secondary custody business of Macau’s existing bond trading platform will also be promoted to encourage more investors to participate in the development of Macau’s bond market.”


“As the first financial institution in Macau to provide services ranging from bond registration, custody, trading and settlement,” Chongwa (Macau) Financial Asset Exchange (MOX) was formally established in October 2018.

Since then, bond issues have mostly come from China. For example, in 2018, Bank of China Macau Branch issued the first RMB4 billion offshore RMB bonds; in July 2019, the People’s Republic of China Ministry of Finance’s RMB2 billion government bonds were issued in Macau, marking the first offshore issuance by the country’s central government in the MSAR; in December 2019, Zhuhai Huafa Group successfully issued Macau’s first public offering of US$200 million corporate bonds. Last June, Nanjing Southeast State-owned Asset Investment Group, an urban and infrastructure developer, has become the first Chinese state-backed entity to list its securities on a Macau bond exchange (1 billion yuan of notes).

“All these indicate that Macau has good bond fund-raising capabilities,” stated Lin Deqin, City University of Macau. “The future Macau Stock Exchange will help high-quality companies to raise funds in a standardized and efficient manner and help companies develop rapidly,” according to the same researcher.

Over the past two years, the Monetary Authority of Macau has issued guidelines that set the rules for the eligibility of bond issuers and for the disclosure of information, as well as the duties and responsibilities of the underwriting and custodian entities, mainly the Guideline on Management of Corporate Bond Issuance and Trading, which imposes transparency and governance requirements on bond issuers.

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