Rating revision lifts US$1.5b bond plan
Fitch switches from stable to positive on China A-minus foreign currency outlook
Credit ratings agency Fitch yesterday revised China's A-minus long-term foreign currency rating outlook from stable to positive, giving a boost to the central government's plan to issue US$1.5 billion in bonds.
The A-rating outlook for the mainland's long-term local currency rating was left unchanged at stable.
The mainland is expected today to appoint six international investment banks to arrange the country's first foray into the global bond market in two years.
The issue aims to raise US$1.5 billion, with $1 billion coming from a US dollar tranche and $500 million from a euro tranche.
The Ministry of Finance is expected to appoint JP Morgan, Goldman Sachs and Merrill Lynch as book-runners for the US dollar tranche, sources said yesterday.
BNP Paribas, Deutsche Bank and UBS have been picked as book-runners for the euro tranche.
A roadshow will kick off in Hong Kong on Thursday, with two teams later moving on to Europe and the United States.
Pricing and maturity dates for the issue are expected to be finalised late next week.
Market watchers said the government bond issue would be big enough to provide a benchmark yield curve for mainland companies wanting to issue debt in global markets. The issue is also a litmus test of investor confidence in China's economy.
Fitch yesterday said China had exceptionally strong external financial support, although the ratings remained constrained by domestic weakness, especially in the banking sector.
A continuing strong balance of payments had boosted China's official foreign currency reserves to levels which now offer a virtually unassailable cushion against external shocks.
Together with net external creditor status, this underpinned a strong and improving capacity to service sovereign external debt.
However, these positives would be mitigated by concerns over medium-term risks to macro-economic and fiscal stability posed by the rapid pace of credit growth and the weakness of the banking system, Fitch said.