Hongkong Bank issue to raise $2b

Hongkong Bank, in a second fund-raising move this year, has launched $2 billion worth of three-year floating rate certificates of deposit paying a coupon of 22 basis points over the Hong Kong inter-bank offered rate (Hibor).

Including fees, the all-in return is 27 basis points over Hibor.

The bank's head of Hong Kong dollar bond markets, Anita Fung, said the pricing was in line with the secondary market trading range for papers of the same maturity.

Including this issue, Hongkong Bank's $20 billion certificates of deposits issue programme, started in 1994, will have $18 billion outstanding.

The Commonwealth Bank of Australia's treasurer for Hong Kong, Andrew Fung, said local issuers were taking advantage of the favourable pricing environment to launch Hong Kong dollar denominated issues to raise cheaper long-term funding to match their long-term assets.

This favourable environment was best demonstrated by the faster growth of Hong Kong dollar deposits compared with foreign bank deposits.

Mr Fung said Hong Kong dollar deposits made up 60 per cent of the territory's total deposits, compared with 50 per cent two years ago, indicating investor confidence in the local currency had been greatly boosted.

Another contributing factor was the absence of high-yield OECD currencies-denominated issues, making local currency issues relatively more attractive.

He said in a strong United States dollar environment, investors holding OECD-currency instruments would be exposed to high exchange risks without higher yields.

From the issuers' perspective, Mr Fung said Hong Kong banks were hungry for long-term funding to match their long-term assets.