BOC's yuan bonds a boost for HK's RMB offshore market
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Bank of China, one of the country's "big four", started to issue up to 5 billion renminbi ( RMB) bonds in Hong Kong from Wednesday, which was believed a big boost for the city to fully establish its offshore RMB market.
It was the third time for BOC, China's largest foreign exchange lender, to float RMB-denominated bonds in Hong Kong, and also the fifteenth deals in this financial hub's RMB bonds market since 2007, when China's central bank permitted mainland financial institutions to issue RMB bonds in Hong Kong.
BOC said in a statement on Tuesday that the bonds issued this time were in two batches with maturities of two and three years, sold to retail and institutional investors in Hong Kong, bearing an annual coupon rate of 2.65 percent and 2.9 percent respectively.
It was also the first RMB bonds offered to local public this year, BOC said.
The sale of bonds, lasting until September 24, would be through 17 banks' local branches, including Bank of China (Hong Kong), Bank of East Asia, DBS and so on.
Considering RMB's future possible appreciation and relatively high interest rate, local analysts expected a passionate response from the market.
Since the mainland's half-year deposit interest rate was 1.98 percent at present, the newly-issued bonds, with its interest paid every six months, were really attractive, senior vice president of treasure and markets at DBS (Hong Kong) Tommy Ong told Xinhua.
Wong anticipated a 150 percent to 200 percent over-subscription of the bonds, which would reach 7.5 to 10 billion.
If BOC could sell 5 billion RMB bonds as planned, the bank would repeat the record set by China Development Bank in 2007.
Besides CDB and BOC, many Chinese mainland financial institutions, including China Construction Bank and Bank of Communications, issued RMB bonds in Hong Kong since 2007.
From 2009, Hong Kong banks' mainland branches, like HSBC (China) and Bank of East Asia (China) joined in, making the total sale of RMB bonds in Hong Kong over 39 billion.
The issue of RMB bonds enriched the investment options for Hong Kong residents and corporate, and broadened the debts market in Hong Kong, said Tse Kwok Leung, head of economic research division at Bank of China (Hong Kong).
They also diversified the funding-raising channels for mainland financial institutions, Tse added.
As the newly issued RMB bonds would make the total number hit the 40-billion mark, the future development of RMB bonds market in Hong Kong was highly valued.
"There were both needs of demand and supply in the market," said Tse, who pointed out that, compared with deposit, higher return had a lure for investors while mainland institutions were also willing to turn to bonds market to raise funds under the relative tightened monetary policy adopted by the central government.
"The issuing of RMB bonds would be a big boost for the establishment of Hong Kong as RMB offshore center, diversifying RMB investment tools in Hong Kong, and playing an active role for the RMB capital development," said Tse.
Meanwhile, Tommy Ong thought the RMB bonds market would not develop at a very fast pace since the RMB deposits in Hong Kong just reached about 100 billion.
Ong suggested that China's Ministry of Finance could float bonds of different maturities in Hong Kong and encourage more banks to get involved to strengthen Hong Kong's RMB offshore market. (1 U.S. dollar is equivalent to 6.8 yuan)
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