by Martina Fuchs
GENEVA, Nov. 30 (Xinhua) -- Luxembourg will retain its position as a top destination for Chinese investment with flows starting to head in the other direction as well, the chief executive of the country's stock exchange has said, adding that efforts to facilitate access to Chinese green bonds for international investors would continue.
The Grand Duchy, one of the smallest but wealthiest countries in the world, has established itself as a hub for banks and financial institutions operating on a cross-border basis in the European Union (EU), and a portal for Chinese investors.
"We have seen peaks in 2017 and 2018, 2019 was a little bit slower, and 2020 will be a bit less active than what we have seen previously due to the pandemic," Robert Scharfe, CEO of the Luxembourg Stock Exchange (LuxSE), told Xinhua in a recent interview, on the sidelines of the virtual conference Horasis Asia Meeting. "But overall, I believe we will remain interesting for Chinese investments and I assume that this will not change in the foreseeable future."
"We also see more and more asset managers from China directly setting up shop in Luxembourg in order to attract capital into China. I think it will only be a question of time until we see flows also going in the opposite direction," he said.
Bank of China was the first Chinese bank to come to Luxembourg almost four decades ago, in 1979, to establish its overseas subsidiary, according to Luxembourg for Finance, the country's agency for development of the financial center. Since then, seven Chinese banks have founded their European hubs in Luxembourg, and two other banks are owned by Chinese shareholders.
"We see a lot of Chinese market operators and the biggest commercial banks which have set up their European headquarters in Luxembourg and branching out into Europe to run their commercial activities," Scharfe said.
Luxembourg has also been among the biggest winners from Brexit as businesses and financial institutions shifted their operations out of the United Kingdom, with many picking Luxembourg as their post-Brexit gateway to the EU single market.
According to the Global Financial Centres Index (GFCI 28) released in September, Luxembourg has moved up 6 places in the overall ranking, putting it in 12th place globally.
Scharfe also said that Luxembourg would further cement its position as an offshore renminbi (RMB) center and a hub for the currency's internationalization process. However, he stressed that there was enough room for competition as other locations including Singapore and London also vie for a slice of the business.
"We are talking about an enormous market which affects all continents. I hope there will be many RMB centers. The RMB as a currency today is still very little represented in international investor portfolios."
GREEN FINANCE GROWTH
With more than 37,000 listed securities, including 33,000 debt instruments, from 2,000 issuers in over 100 countries and regions, the LuxSE is one of the world's leading exchanges for the listing of international securities, according to the bourse.
In 2016, the bourse launched the Luxembourg Green Exchange which became the first exchange in the world to operate a platform dedicated entirely to sustainable financial securities.
"Green bonds are the perfect instruments for investors who would not simply provide money or funds to a company, but they want to know what the money is being used for," Scharfe told Xinhua. "The pandemic has shown that there is a general understanding that capital markets need to move in a direction of green, social and sustainable financial instruments."
A green bond is a type of fixed-income instrument that is specifically earmarked to raise money for climate and environmental projects, such as clean energy and pollution control projects.
As of Oct. 31, the Luxembourg Green Exchange displayed more than 850 green, social and sustainable securities, with a total value of close to 350 billion euros, from 150 issuers in over 30 countries and regions, data provided by the exchange showed.
"There are more and more Chinese institutions that go international and issue green bonds according to international standards. We are helping a number of institutions in conforming to the international standards," Scharfe said.
In addition, the Shanghai Stock Exchange and the LuxSE launched a Green Bond Channel in 2018 aiming to close the information gap between Chinese issuers and international investors. Green bonds listed on the Shanghai Stock Exchange can be traded via existing channels, while the LuxSE provides information on Chinese domestic bonds in English to offshore investors.
"The Green Bond Channel is a bridge between the Chinese domestic market and the international investor community with the sole objective of trying to harmonize as much as possible the underlying criteria for these bonds," Scharfe said. Enditem