Standard Chartered’s prime services platform has expanded its range of eligible collateral to include Chinese government bond assets held via Bond Connect.
The expansion provides support for Standard Chartered’s FX prime brokerage and rates intermediation clients that are required to post collateral for uncleared derivatives trades.
Eastfort Asset Management, a Hong Kong-based investment manager that focuses on onshore China bonds, is the first client to use the new service.
“We are delighted to be the first to use CGB as a pledge for other transactions with Standard Chartered, who is our key partner and the most advanced counterparty in the China bond market,” said Edmund Ng, chief investment officer and co-founder, Eastfort Asset Management.
“This should further facilitate China bonds to become a more mainstream asset class in the global asset allocation framework.”
The move capitalises on the latest development in the Chinese capital market opening up to foreign investors, which most recently, included the inclusion of Chinese government bonds to the Bloomberg-Barclays Global Aggregate bond index and the JP Morgan government bond-emerging market index.
Standard Chartered hopes this will boost the acceptance of Chinese debt as collateral outside of China, and further advance the internationalisation of the Chinese renminbi (RMB).
“We understand that the cost of funding margin can translate into a drag on performance for our clients. As our clients’ trusted prime broker, we are committed to help them maximise funding efficiencies across their portfolio by offering access to innovative solutions,” said Luke Brereton, co-head of prime services, Standard Chartered.
“The collaboration with our securities services team to include assets held via Bond Connect in our prime custody offering truly demonstrates how we add value to our clients.”