OPINION – The Macau bond market, an opportunity for Portuguese-speaking companies

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By Calvin Chui, Partner of Rato, Ling, Lei & Cortés – Lawyers and Notaries – Lektou


The Macau government intends to promote adequate economic diversification and modernization of the financial sector in the region, in line with the national economic development cycle.

Twenty-two years after the return of Macao to the People’s Republic of China, the Macao Special Administrative Region (SARM) is going through a decisive period in its history. Public policies are based on the diversification of an economy that has always relied almost exclusively on the two pillars of tourism and gambling.

In September last year, a general plan for the Guangdong-Macao Deeper Cooperation Zone (GMICZ) was announced for neighboring Hengqin Island, as a way to deepen Deng Xiaoping’s principle of “one country, two systems”, which is consecrated and confirmed. in the Basic Law of the Macao SAR, and promote the appropriate diversification of Macao’s economy, making life easier for residents of the MSAR. The GMICZ is an important stepping stone for the Guangdong-Hong Kong-Macao Greater Bay Area project, becoming a political and administrative tool to promote the stability and integration of the MRAS into the national development framework and to realize the conditions for the diversification of its industries.

The authorities intend to develop four new industries: (1) scientific and technological research and development and high-level manufacturing, (2) traditional Chinese medicine and other iconic enterprises in Macao, (3) culture and tourism, congresses and exhibitions and trade, and (4) modern finance.

In order to encourage commercial companies to use Macao’s bond market to obtain financing, the Executive Committee of the Deep Cooperation Zone issued a “special measure to support the issuance of bonds in Macau by commercial companies ( provisional)” last week. According to this measure, companies issuing bonds in Macao can be subsidized with a maximum amount of 5.5 million renminbi (760,000 euros), thus reducing the issuance costs.

The start of Macau bond market operations dates back to 2018 with the establishment of Chongwa (Macau) Financial Assets Transaction, SA (“MOX”), which manages the bond issuance and trading platform in the SAR.

It should be noted that in January 2020, MOX and the Luxembourg Stock Exchange (LuxSE) signed a Memorandum of Understanding in order to establish a fruitful cooperation, in particular in the promotion of cross-border investments and liquidity for offshore financial products denominated in renminbi. .

Since then, Macau’s bond market mainly includes the issuance of government bonds, local government bonds and public enterprise (“SOE”) bonds.

Until September 2021, 65 listing or bond issuance processes have been recorded on MOX, for a total amount of nearly 196 billion patacas (21.56 billion euros).

Currently, the legal and financial framework for issuing and underwriting bonds in Macau is mainly provided by Section III of the Macau Financial System Law, approved by Decree Law no. 32/93/M of July 5, 1993, three directives issued by the Macau Monetary Authority (“AMCM”): Directive on the Management of Issuance and Trading of Corporate Bonds (Circular No. 008/ B/2021-DSB-AMCM), which sets out the rules and procedures for issuing bonds by local and foreign commercial companies; Directive on Underwriting and Custody of Corporate Bonds (Circular No. 009/B/2019-DSB/AMCM), which regulates the activities of offering, selling and safekeeping of corporate bonds in Macau; and Bond Registration and Settlement Directive (Circular No. 021/B/2021-DSB-AMCM), which regulates procedures for the registration, safekeeping and settlement of bonds issued in Macau.

Locally incorporated commercial companies and foreign commercial companies must fulfill certain conditions to be authorized to issue bonds in Macau to professional investors by public subscription, in line – to some extent – with what is already the case in other markets. of transferable securities, namely with regard to the financial situation: (i) Result, (ii) Cash flow from operations, (iii) Capacity to pay interest, (iv) Value of assets/equity.

Also recently, in the policy discourse for 2022, the RASM government has prioritized the attraction of entities from mainland China and Portuguese-speaking countries to the Macau securities market, as well as their participation in operations. financing in renminbi.

In order to develop the market, the government intends to cancel the current system of appraisal and approval of bond issuance and introduce types of investment banking licenses. But it does not stop there: the government of Macau intends to stimulate the appropriate diversification of the economy and the modernization of the financial sector in the region, in accordance with the cycle of national economic development.

To this end, it intends to develop the aforementioned bond market, but also financial management and leasing activities, as well as promote the construction of a cross-border renminbi settlement center, strengthening green financial activities.

In December 2021, the Macau Central Securities Depository (CSDM) was launched, which is an “indispensable key financial infrastructure for mature international bond markets, adding that the CSDM is a new source of impetus for the financial market industry. and the proper diversification of the economy”, as mentioned by the Secretary for Economy and Finance, Mr. Lei Wai Nong.

In this context, the measure which includes subsidizing the issuance of bonds in Macau by commercial companies in the deep cooperation area will, with certainty, position the Macau bond market as a direct financing channel in the Greater Bay Area, a national policy that includes nine cities in Guangdong Province and the two special administrative regions.

For Portuguese-speaking companies, the Macau bond market should be seen as another financing opportunity that will certainly have a medium to long-term return and could decisively position them on the Macau platform.

*This article is based on another article in Portuguese published by the same author in Jornal Económico

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