Bonds to benefit as Connect lifts investor liquidity

China's plan to give foreign investors unprecedented access to mainland equities through the Shanghai-Hong Kong exchange link has JPMorgan Chase & Co pointing to an unlikely beneficiary - the bond market.

While fixed-income securities are excluded, the link will provide another route to buy Shanghai shares for money managers who already have approval to invest in Chinese stocks and bonds through the Qualified Foreign Institutional Investor program. That frees up some of their $64 billion quota to be deployed in the debt market, according to JPMorgan.

Investors will be "switching their QFII investments," said Adrian Mowat, the chief Asian and emerging markets equity strategist at JPMorgan in Hong Kong. "You can then use it for things in the fixed-income market."