First yuan bond likely this month
The first yuan-denominated bond to be sold in Hong Kong is expected to be launched this month after the People's Bank of China yesterday published the rules governing the issuance of the paper by mainland banks.
Mainland policy banks and commercial lenders with core capital adequacy ratios of at least 4 per cent and which recorded a profit in each of the past three years, and have not breached any laws in the same period are qualified to apply to sell bonds with a tenor of one year and over in Hong Kong, according to the regulations published on the bank's website.
'It is an important breakthrough for Hong Kong to become the first place outside of the mainland to have a yuan bond market,' said Financial Secretary Henry Tang Ying-yen. 'This will help strengthen Hong Kong's status as an international financial centre.'
The move would provide new business opportunities for Hong Kong lenders and offer a new investment alternative for residents, he said.
Several mainland financial institutions had begun preparations to issue yuan bonds and the first could be launched before the end of June, he said.
Sources said two mainland policy banks, China Development Bank and Export-Import Bank of China, were vying to be the first lenders to issue yuan bonds in Hong Kong.
'They have already held initial talks with banks here, and HSBC and Bank of China (Hong Kong) would be the co-ordinators for the issues,' said a source.
The size of the first bond issue would be about two billion to three billion yuan, given the size of Hong Kong's yuan deposits, which stood at 25.48 billion yuan in April. The tenor would be about two to three years, market sources said.
The PBC has specified that the pricing of the bonds would be determined by the issuing institutions and their underwriters.
How the bonds are sold, traded and settled would be based on Hong Kong's own rules and market practices.
Banks have to issue a bond within 60 working days of obtaining approval and must remit the proceeds back to mainland within 30 working days of receiving them.
Hong Kong Monetary Authority chief executive Joseph Yam Chi-kwong early this year said that Hong Kong residents with yuan deposits and banks with yuan in hand could invest in such bonds.
The HKMA on Monday will brief members of the yuan working group of the Hong Kong Association of Banks on the issue.