China’s US$1.24 billion sovereign bond draws strong demand in Hong Kong on eve of southbound Bond Connect launch
- The 8 billion yuan bond offering is oversubscribed by double and has attracted 24.56 billion yuan in orders
- The bond qualifies for the new cross-border channel that will allow mainland investors to trade in the HK$2 trillion bond market in Hong Kong from Friday
The offering, which has tenures of two years, five years and 15 years, was oversubscribed by double on Thursday and attracted 24.56 billion yuan in total orders from investors worldwide who bid via tender through a mechanism run by the Hong Kong Monetary Authority, according to an announcement by the de facto central bank.
The sovereign bond qualifies for the new channel of the cross-border trading scheme that will allow mainland-based professional investors to trade in the HK$2 trillion bond market in Hong Kong. The scheme is expected to be a game changer, boosting the local bond market, according to bankers.
In Hong Kong, the HKMA has appointed 13 banks including the three note issuing lenders HSBC, Standard Chartered and Bank of China (Hong Kong) as market makers. The HKMA will initially have a central clearing unit for Hong Kong dollar- and yuan-denominated bonds, or dim sum bonds, before expanding to other currencies at a later stage.
“Since the Ministry of Finance first issued sovereign bonds in Hong Kong in 2009, the scale of the offering has kept expanding,” said Sun Yu, vice-chairman and CEO of BOCHK. “The offerings show the country’s support for Hong Kong to strengthen its position as an international financial centre and as an offshore yuan trading centre.”
Bank of Communications, which helped handle the sovereign bond offering, said Thursday’s successful sale showed international investors have a strong appetite for yuan-denominated bond products.