China firms issue record US$14 billion convertible bonds as market revives

China’s top companies have raised a record US$14 billion in offshore convertible bonds so far this year as they diversify future funding needs while interest rates stay high.

Offshore convertible bonds from mainland China accounted for 22 per cent of global deals, LSEG data showed, after Alibaba Group raised US$5 billion in May and Ping An Insurance finalised a US$3.5 billion transaction last week.

The amount raised so far this year from China is up 1,588 per cent on the same period in 2023, the data showed, when just US$829.3 million was raised in convertible bonds.

The pickup in Chinese convertible bond issuance is giving deal makers hope that capital market activity will start to lift, especially in Hong Kong, where IPOs are at the lowest point in 15 years. The previous 12-month high was US$10.9 billion in 2021.

“If you think about the typical sequence in which the markets reopen, it’s typically blocks, primary equity and convertibles that will lead and the last product to reopen is IPOs,” said Saurabh Dinakar, co-head of Asia-Pacific global capital markets at Morgan Stanley

“In the past two years, we didn’t see activity across any of the products. And frankly, there was a lack of conviction from international investors around investing in Hong Kong and China. I think what’s changed over the last three months is that some of the confidence has returned.”