Banks see lion's share of 3b yuan bond issue
Finance Ministry's release to HK residents comes as IPOs compete for investors' funds
The Ministry of Finance has raised three billion yuan (HK$3.7 billion) by issuing a short-term yuan-denominated sovereign bond to Hong Kong residents, with most of the buying being done through the city's commercial banks.
Local brokerages, which are struggling with high operating costs and a low appetite for stock trading, were given the cold shoulder by retail investors and have instead focused on getting business by offering attractive stock margins on hot new stocks.
Eugene Law, business development director at China Galaxy International, said it had focused on promoting the IPO business at the expense of the latest sovereign bond sale because local brokers had always been strongest in the equities trading business.
Retail demand for the latest offshore yuan bond offering was modest at a time when the city's IPO market is showing signs of meaningful recovery.
Nelson Chan, chief executive of local brokerage Bright Smart Securities, said most retail yuan investors in Hong Kong held their yuan in commercial banks, so it made sense for them to subscribe to the bond through relationship banks. Most retail bond buyers were long-term investors who made capital security a priority, he said.
The latest sovereign bond, with a two-year tenor and offering a coupon rate of 2.8 per cent, followed the issuing of five billion yuan of three-year maturity bonds and two billion yuan of five-year tenure bonds that focused on institutional investors.