Macau, renowned as the world’s gambling capital, is experiencing a surge in bond listings, signifying its ambition to diversify its economy and establish itself as a prominent financing center for Chinese companies. This year, a record-breaking $28.1 billion in bonds have commenced trading on the Chongwa (Macao) Financial Asset Exchange Co. (MOX). This influx of listings, primarily yuan-denominated bonds issued by Chinese local government financing vehicles (LGFVs), underscores Macau’s growing prominence in the financial landscape.
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MOX: Facilitating Growth in Bond Listings
Since its inception in 2018 with a modest $600 million in bond listings, MOX has experienced exponential growth. This remarkable progress is attributed to Macau’s strategic initiatives, making debt registration more streamlined and cost-effective compared to major Asian financial hubs like Hong Kong and Singapore. The surge in offshore debt issuance by Chinese LGFVs, facing domestic borrowing constraints, has further fueled MOX’s expansion.
“We are still in the early stages of development and need to expand the investor and issuer base,” stated Henrietta Lau, Executive Director of the Monetary Authority of Macao. The overarching goal is to establish Macau’s bond market as a crucial financial bridge connecting mainland China with global markets.
Notable Listings and Market Share Growth
MOX has facilitated significant bond offerings, including a landmark 2 billion yuan issuance by China’s Ministry of Finance in 2019, marking the first of its kind in Macau. Subsequently, a 2.2 billion yuan deal by Guangdong province further solidified MOX’s position. Recently, the exchange has become a preferred venue for smaller listings, often under $100 million, by LGFVs seeking alternative financing options.
Macau’s bond listings currently represent approximately 26% of Hong Kong’s, a substantial increase from 3.8% in 2020. This growth reflects the Chinese government’s intention to position Macau as a key bond listing destination in Asia, particularly for offshore yuan-denominated bonds and free trade zone bonds, according to Zerlina Zeng, Head of East Asia Corporate Research at Creditsights Singapore LLC.
Overcoming Challenges and Future Outlook
While Macau’s ambition to become a leading bond trading center is evident, challenges remain. Despite streamlined registration processes, debt structuring, sales, clearing, and settlement often occur outside Macau. The absence of a robust secondary market poses another hurdle.
To address these challenges, Macau is implementing a comprehensive securities law to enhance investor protection and attract larger debt issuers. A strategic partnership with the Luxembourg Stock Exchange aims to integrate Macau-listed bonds into Luxembourg’s established trading platform, increasing accessibility and liquidity. Furthermore, collaborations with Clearstream Banking SA and Euroclear Holding NV are under discussion.
Looking ahead, MOX anticipates significant growth in green and sustainable bond listings in 2025, driven by increasing investor focus on ESG (Environmental, Social, and Governance) factors. As of November, these bonds held a combined listed value of approximately $16.9 billion. Macau’s commitment to developing its bond market, coupled with its strategic location and supportive government policies, positions it for continued growth as a vital financial hub in the region.
