Russia Close to Debuting China Market Link, Bourse Chief Says

(Bloomberg) -- Russia and China are close to completing a system for clearing trades that will boost funding options for their companies and governments, according to the head of Russia’s biggest bourse.

Depositaries in China and Russia will open joint accounts in the “near term,” Alexander Afanasiev, the chief executive officer of Moscow Exchange PJSC, said in an interview. While Russia’s Finance Ministry is already able to sell its debt to local Chinese investors in Moscow should it choose, the bourse is still working with counterparts in China to turn it into a faster and cheaper process.

“We now see China’s political will in this project and don’t foresee serious obstacles,” said Afanasiev, without specifying when the project would be finished. “I don’t see hurdles that would prevent us from launching bilateral trading in the short term."

Russian officials announced they were starting work on an eastern equivalent to Euroclear Bank SA’s settlement system a year ago as U.S. and European Union sanctions over Ukraine curtailed access of the nation’s companies to Western capital markets. Yuan-ruble turnover plunged 96 percent to 7 billion rubles ($110 million) in August from a year earlier as trade declined, while the volume of swap trading has more than doubled to $1.1 billion, according to data from the exchange.

“Chinese legislation rather seriously limits the ability of non-residents to invest in national, yuan-denominated, products,” said Afanasiev. “Here the Moscow Exchange creates additional opportunities for investments."

Russia may sell its debut yuan-denominated OFZ debt this year, or in the nearest future, as it seeks to attract domestic Chinese investors to the Russian market, the Finance Ministry’s debt department chief Konstantin Vyshkovsky said in an interview on Sept. 23. The ministry, the Moscow Exchange and the two nations’ central banks are “actively" working on the pilot bond sale, he said.

On Friday, the Bank of Russia announced the creation of a yuan clearing center after the People’s Bank of China authorized the Russian unit of Industrial & Commercial Bank of China, a step aimed at promoting the use of yuan in cross-border transactions between companies and financial institutions.

--With assistance from Elena Mazneva and Anna Andrianova To contact the reporters on this story: Ksenia Galouchko in Moscow at kgalouchko1@bloomberg.net, Olga Voitova in Moscow at ovoitova@bloomberg.net. To contact the editors responsible for this story: Alex Nicholson at anicholson6@bloomberg.net, Daliah Merzaban