Russia Mimics Euroclear With China Market Link as Ties Grow

03 September 2015
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Russia and China are working on an eastern equivalent to Euroclear Bank SA’s bond, stock and currency settlement services as they seek to boost two-way investment in their markets.

“We see serious progress in establishing a bridge between two central depositories,” which will eventually allow Russian investors to trade directly in Chinese markets and vice versa, Deputy Finance Minister Alexey Moiseev told reporters at an economic forum in Vladivostok. He described the platform as “something like a Euroclear analogue between Russia and China.”

Russia is turning to China to fill the gap created by U.S. and European Union sanctions over Ukraine, which curtailed access of the nation’s companies to Western capital markets. Trading in the yuan-ruble currency pair on Russia’s main bourse jumped fourfold in August compared with a year earlier, reaching a record 18.4 billion yuan ($2.89 billion), the Moscow Exchange said on Wednesday.

China set new rules in July making it easier for big international investors to access its $5.7 trillion interbank bond market. That’s encouraged Vnesheconombank, the Russian state development bank locked out of Western capital markets by the sanctions, to start talks on selling yuan bonds on the Chinese mainland.

“The infrastructure must open up a window onto Asia,” Sergey Shvetsov, first deputy governor of Bank of Russia who oversees financial markets, said at a banking conference in Sochi on Wednesday. “This link will give Russian investors access to Chinese securities -- and to bonds in particular, because we are currently only discussing a bond link -- while Chinese investors will gain the ability to hold Russian securities without leaving China.”

Russia’s National Settlement Depository, a subsidiary of the Moscow Exchange PJSC, set up links with Euroclear and Clearstream Banking SA in 2013 as the government sought to lower borrowing costs by making it easier for overseas investors to trade the country’s local debt directly. Foreigners’ share of the 3.3 trillion-ruble ($49 billion) local bond market rose as high as 28.1 percent in April 2013 before sliding to 18.6 percent in May this year.

The ties between the depositories should be concluded in the next 12 months, Moiseev said. Russia’s National Settlement Depository is considering widening cooperation with other international counterparts, its chief executive officer, Eddie Astanin, said in e-mailed response to Bloomberg on Thursday.

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