KUALA LUMPUR (May 6): The People’s Bank of China’s (PBoC)’s move to liberalise its bond market is a boon for Malaysian investors to capitalise on China’s major investment plans such as the “One Belt One Road” initiative, according to HSBC Bank Malaysia Bhd.

In a note today, HSBC said the greater access to China’s capital markets is expected to spur greater use of the Renminbi in investments, which makes perfect sense in the light of China’s ambitious investment plans, such as the “One Belt One Road” initiative, which Malaysia stands to benefit from.

HSBC said Malaysia stands to benefit from China’s “One Belt One Road” initiative, as the huge amounts of spending involved will lift economic activity and help deploy some of mainland China’s excess capacities (for example in construction and steel) to countries which can use the excessive funds and expertise to execute such projects themselves.

“We believe that the Belt and Road Initiative can be another catalyst for China’s financial reforms, leading to more pro-market changes like the recent ones,” the note read.

First announced in 2013, the “Belt and Road” initiative involves the investment of billions of dollars into infrastructure such as railways, highways and ports that will strengthen links between mainland China and the dozens of countries to its west and south.

HSBC said the PBoC’s move to amend the rules governing domestic retail investment in Chinese bonds and further measures to liberalise global investors’ access to China’s vast interbank bond market, indicate China is serious in its efforts to make sure that its bond market — the world’s third largest — becomes a more effective mechanism for converting domestic and international savings into investment capital.

“Allowing more retail and foreign investors into the bond market will allow it to become more liquid and improve the allocation of capital,” it said.

“By expanding the foreign institutional investors base, China can enhance the mechanism for pricing credit risk.

“It also helps the financial system to diversify risk, and reduce its over-reliance on the banking sector,” it added.

HSBC Malaysia chief executive officer (CEO) Mukhtar Hussain said China remains as Malaysia’s largest trading partner for the seventh consecutive year since 2009 and therefore, Malaysia is ideally positioned to reap the benefits from China’s financial reform.

He said China’s bond market has not traditionally enjoyed the same attention as its stock market, but these reforms make it clear that policymakers are committed to improve the efficiency of China’s capital markets and increase the importance of fixed income to the economy and financial system as a whole.

“Domestic retail investors and global investors alike, should pay close attention,” he added.