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When it comes to China, Donald Trump is not shy about taking credit. The US President’s self-proclaimed list of achievements even includes convincing Chinese President Xi Jinping not to send troops into Hong Kong to deal with months of anti-government protests in the special administrative region, according to a rambling interview he gave to Fox News in November. As far-fetched as that may be, Hong Kong’s capital markets probably owe him some gratitude. The Stock Exchange of Hong Kong leapfrogged both the New York Stock Exchange and Nasdaq to become the largest venue for new listings in 2019 following Alibaba Group’s HK101bn (US$12.9bn) November offering, according to Refinitiv data. Trump cannot claim any direct influence on China’s biggest e-commerce group, but the timing of Alibaba’s float, against a backdrop of political unrest and volatile equity markets, points to rising concerns about the impact of the US-China trade war on the global capital markets. “A lot of Chinese companies listed in the US are having to think more carefully about the potential risk of being caught in the cross-fire of the trade dispute,” said one senior investment banker. “Having a secondary listing either in mainland China or in Hong Kong is a natural hedge against the worst-case scenario.” For Chinese companies, that worst-case scenario involves a loss of access to the US capital market. Three separate bills have been submitted to Congress that would force companies to delist from the US unless regulators agree to allow US oversight of their auditing process, a longstanding source of tension between Beijing and Washington. In November, lawmakers also introduced a bill to prevent a government pension fund from investing in Chinese stocks, while the Commerce Department in October placed eight companies on a trade blacklist, including several IPO candidates. “There’s a risk of the trade war spilling over into financial markets, although portfolio inflows from the US into China are still quite negligible and therefore the overall effect on its balance of payments would be low,” said Brad Setser, senior fellow for international economics at the Council on Foreign Relations and former staff economist at the US Department of Treasury. “So far most of the discussions around financial decoupling have been kept separate from the trade negotiations but if the negotiations were to turn sour or if there was a breakdown in China-US relations over Hong Kong, for example, that could change matters.” LISTING BAN Trump has made a new trade deal with China a centrepiece of his administration and can legitimately claim to have had a lasting impact on relations between the two superpowers. Calls for a reset of the trade balance now cross the political divide, and Chinese companies expect US policymakers to be far less accommodating – regardless of the result of impeachment proceedings and the 2020 presidential election. So far, efforts to restrict China’s access to the US capital markets have come mostly from Congress, rather than the President, with three bills submitted in the last two sessions (one of which has since expired) that would effectively ban Chinese companies from listing in the US and force those currently listed there to comply with tougher regulations or be delisted. The most notable of the three bills, the Ensuring Quality Information and Transparency for Abroad-Based Listings on our Exchanges, or the EQUITABLE Act, was introduced in Congress in June by a bipartisan group of lawmakers led by Republican Senator and one-time presidential candidate Marco Rubio. Ostensibly designed to improve transparency, the proposed law would block listings from foreign companies that fail to submit to US regulatory oversight of their auditing process. Companies already listed in the US would have three years to comply or face delisting. Although the bill’s only re

There is a term in Japanese business circles for a market that has developed without the influence of external forces. Garapagosu-ka, which translates to Galapagosization, takes its inspiration from the quirks of nature found only in the remote Galapagos islands, almost 1,000km off the coast of Ecuador. It is a fitting description for the yen bond market, which has retained its own unique characteristics even as the global markets have evolved to become faster and more efficient. This fondness for isolation, however, is slowly fading. After six years of monetary easing that has dragged government bond yields well below zero, Japanese investors are scouring the globe for higher returns. The vast domestic bond market is gradually embracing international influences, too. Foreign issuers have introduced the pot system to the yen market, leading a shift away from the retention system that has been a characteristic of bookbuilding in Japan for as long as underwriting syndicates have existed. The pot, where the lead managers run a single order book, encourages transparency and promotes accountability, minimising the risk of rival underwriters competing to sell their individual pieces. Issuers argue the process delivers the best possible price for their debt, and it has been the dominant bookbuilding strategy in the global markets for 20 years. The first Samurai bond to use the pot system was a three-tranche financing for Korea’s Shinhan Bank in October 2017, when the issuer and its advisers were looking for greater efficiency amid worries about geopolitical risk in the Korean peninsula. The idea caught on surprisingly quickly, and all international yen issues since have followed the pot system. But the traditional retention system still lives on in Japan’s domestic market, where big investors remain extremely secretive and bankers resist any calls to share information with rivals. The pot system has gained some traction on hybrid bonds as they share characteristics with equity offerings, where large shareholders are made public. As such, it is easier to convince issuers and investors that the pot system is preferred. Some small green bonds have also been sold using the pot system, but it was not until May 2018 that the method was used for the first time on a major domestic straight bond – Fast Retailing’s ¥340bn four-tranche offering. issuance FORMATS Japanese investors have also broadened their horizons in terms of issuance format, with the result that foreign issuers no longer need to spend the time and money to prepare local language documentation before selling bonds locally. Samurai bonds, issued under Japanese law and included in the Nomura BPI, Japan’s major bond index, are still the preferred choice for most Japanese money managers. Increasingly, however, the big savings banks, insurance funds and asset managers accept yen bonds issued off EMTN and SEC-registered programmes, as limiting their options would lead to missed investment opportunities. In addition, the Bank of Japan’s ultra-low rates and massive bond buying programme have squeezed local returns, sending yield-deprived investors into foreign currencies, where EMTN programmes and SEC registration are common. The first wave of euroyen and global yen issuance came in 2017, when multinationals such as Starbucks and Walmart tapped the yen market in search of cheap funding. The second push followed in early 2019, as global banks rushed to sell yen bonds to raise funds to fulfil total loss-absorbing capacity requirements. The first quarter of this year was also the final three months before the Japanese Financial Services Agency increased the risk-weighting on TLAC investments for some Japanese regional investors. TLAC issuers – by nature some of the world’s most sophisticated financial institutions – chose the euroyen format to avoid the lengthy documentation process that comes with a Samurai offering and were abl