Several banks in Hong Kong said retail investor appetite for China's sovereign debt issue was weaker than last year, partly reflecting expectations that the yuan's appreciation is likely to slow.
Beijing issued 23 billion yuan (HK$28.23 billion) of sovereign bonds in Hong Kong on Thursday, with 5.5 billion yuan earmarked for retail investors, with a two-year tenor at an annual interest rate of 2.38 per cent, comfortably higher than deposit interest rates.
But Standard Chartered and Citic Bank International said investors' response was weaker than last year, although Citic Bank International predicted that subscription rates would probably pick up next week.
A Standard Chartered spokesperson said the long weekend to mark the anniversary of Hong Kong's return to Chinese rule could have sidelined some investors - along with a typhoon signal that was hoisted yesterday. But economists also said yuan jitters were a key consideration.
'A major reason people are less excited is because they are less confident that the yuan will continue to appreciate strongly,' said Nathan Chow, an economist at DBS, adding that the bond had to compete with other yuan investment products.
Standard Chartered economists said this month that the yuan was likely to depreciate against the US dollar this year due to weakening economic growth at home and slumping exports.
This year's retail interest rate set at 2.38 per cent was much higher than last year's. The Ministry of Finance issued five billion yuan worth of two-year bonds to retail investors in Hong Kong at a coupon rate of 1.6 per cent last year. In general, dim sum bonds - yuan-denominated bonds offered in Hong Kong - had an average yield of 5.6 per cent in May, according to Bank of China data. DBS and HSBC said retail subscription amounts were still close to last year's.