Panda bond market

Krisis Finansil Cina: Perspektif Kebijakan Moneter, Corporate Finance (Analisa Laporan Keuangan), dan Investment Banking (Valuasi Nilai)
oleh : Sando Sasako
Jakarta, 28 Maret 2016

ISBN 978-602-73508-5-4

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Daftar Isi

Kata Pengantar iii
Kata Pengantar dalam buku ‘Corporate Financing’ v

Daftar Isi vii
Daftar Tabel x
Daftar Bagan xi

Pendahuluan 1
Masalah Pengukuran 1
Data, Informasi, Fakta 2
Data Mining 4
Pemilahan Data 5
Business Intelligence 7
Analisa Kuantitatif 8
Analisa Data 8
Self-Organising Map 9
Hambatan bagi Efektivitas Analisa Data 11
Confirmatory Data Analysis 11

Analisa Finansil 11
Standar Akuntansi Keuangan (PSAK, GAAP, IFRS) 12
Peran Perusahaan Audit dalam PSAK 12
Analisa Finansil sebagai Alat Ukur Kinerja Keuangan 12
Analisa Fundamental 13

Rasio-rasio Finansil 14
Pertumbuhan 14
Produktivitas 14
Kontribusi terhadap Stakeholder 14
Dividend Policy Ratios 14

Rasio-rasio Aktivitas Usaha 15
Perputaran aset (asset turnover) 15
Perputaran aset rata-rata (asset turnover) 15
Rasio perputaran aset tetap (fixed assets turnover) 15
Perputaran piutang (receivables turnover) 16
Rata-rata periode penagihan (average collection period) 16
Perputaran inventaris (inventory turnover) 16
Periode inventaris (inventory period) 16

Rasio-rasio Likuiditas 17
Rasio lancar (current ratio, CR) 17
Rasio modal kerja (working capital ratio) 18
Rasio cepat (quick ratio, QR) 18
Rasio kas (cash ratio) 18
Pendapatan lancar (current income) 19
Rasio pendapatan bunga (Time Interest Earned, Interest Coverage) 19
Rasio investasi terhadap kebijakan (investment to policy ratio) 19
Rasio utang lancar terhadap inventaris (current debts to inventory ratio) 19

Rasio-rasio Profitabilitas 19
Marjin laba kotor (gross profit margin) 20
Marjin laba bersih (net profit margin) 20
Return on Equity (ROE) 20
Return on Asset (ROA) dan Return on Capital Employed (ROCE) 20
Return on Capital (ROC) dan Return on Invested Capital (ROIC) 21
Return on Investment (ROI) 21
Beban bunga (Interest Coverage, Times Interest Earned) 22
Beban finansil (financial leverage) 22
Efisiensi beban finansil (efficiency of financial leverage) 22

Rasio-rasio Struktur Modal 23
Rasio utang terhadap modal (debt to equity ratio) 23
Rasio kapitalisasi (capitalisation ratio) 24
Tingkat pertumbuhan ekuitas (equity growth rate) 24
Beban finansil (financial leverage) 24
Rasio utang (debt ratio) 24
Rasio modal saham terhadap aset tetap bersih 24
Rasio utang lancar terhadap modal saham (Current Debts to Net Worth Ratio) 24
Rasio kewajiban total terhadap modal saham (Total Liabilities to Net Worth Ratio) 25
Rasio aset tetap terhadap modal saham (Fixed Assets to Net Worth Ratio) 25

Rasio-rasio Kecukupan Modal 25

Solvabilitas 25
Solvency ratio (SR) 26
Rasio utang terhadap aset (Debt to Asset Ratio, DAR) 26
Rasio utang terhadap modal (Debt to Equity Ratio, DER) 26
Kemampuan laba menutup biaya tetap (Fixed Charge Coverage). 26
Rasio pinjaman terhadap aset (Loan to Asset Ratio, LAR) 27
Rasio pinjaman terhadap simpanan (Loan to Deposit Ratio, LDR) 27

Risks vs Rewards 27
Risiko Mencari Keuntungan 28
Efek Domino Risiko 29
Rent-Seeking Behaviours 30

When the Deal Slips Away 32
Indikator Kesulitan Finansil 34
Indeks Kerentanan 36
Stress Test 38
Indeks Stabilitas Sistem Keuangan 40
Financial Stability Index 43
Indeks Kesehatan Finansil ala IMF 44
Laporan Stabilitas Finansil Global ala IMF 48
Operasi Moneter 48
Inflasi Terencana sebagai Prasyarat Kestabilan Finansil 50

Dinamika Pasar Finansil 52
Dinamika Aset Finansil 53
Kerapuhan Sistem Finansil 54

Krisis Finansil 55
Menelikung Krisis Finansil 56
Kasus LTCM 57
Krisis Subprime Mortgage 60
Kasus Lehman Brothers 63
Krisis Eurozone 64
Spiral Kekacauan Krisis Eurozone 65
Debt Exposures of PIGS 66
AS 68
Inggris 69
Jerman 69
Perancis 70
Jepang 71
Yunani 72
Irlandia 73
Italia 74
Portugis 74
Spanyol 75
Some PIGS are More PIGS 76
Krisis Finansil Cina 77
Kenapa Cina menjadi begitu penting? 78
Bermain dengan nilai tukar 81
Pasar CNH 82
Dominansi nilai tukar CNH terhadap CNY 87
Qualified Foreign Institutional Investor 90
Renminbi Qualified Foreign Institutional Investor 90
Qualified Domestic Institutional Investor 91
Qualified Domestic Individual Investor 91
Shanghai-Hong Kong Stock Connect 91
Pilot Free Trade Zones 91
Mainland-Hong Kong Mutual Recognition of Funds 92
Kenapa pasar finansil Cina bisa crash? 92
Ketika gelembung finansil Cina mulai pecah 93
Pelonggaran likuiditas sebagai solusi ancaman resesi 94
Aksi pemadam kebakaran ala pemerintah Cina 96
Permasalahan fundamental ekonomi Cina 99
Beban utang Cina 101
Kebijakan dan otoritas moneter Cina 102
Pasar obligasi Cina 103
Obligasi Panda 105
Obligasi dim sum 106
Daftar emisi obligasi dim sum 108
Aksi pemerintah Cina terhadap masalah tunggakan utang 110

Policy and Politicisation 113
Primary Dealer 113
Solusi Teoritis, Bisa dan Benarkah? 116
Kebijakan Too Big To Fail 117
Cashless Solution 118
Minyak sebagai Mata Uang dan Sumber Kemakmuran 120
Negative Interest Rates Policy 125

Kas 129

Pengadaan Aset 130
Asset Investment 130
Asset Financing 131
Capital Expenditures 132
Menghitung Biaya Modal 134
Biaya utang 134
Biaya saham preferensi 134
Biaya laba ditahan 134
Biaya ekuitas eksternal 135
WACC 135
Biaya modal marjinal 136
Break point 136

Off-Balance Sheet Financing 136
Perubahan Portofolio The Fed 136
OBS sebagai Produk Inovasi Menyembunyikan Risiko Finansil 137
MBS sebagai Produk Rekayasa Finansil Penyebab Krisis 2008 139
Bencana Prilaku Berisiko Berlebihan 141
Bertaruh pada Aset Fiktif 142
Akuntansi OBS 144
Fleksibilitas Pasal Karet 145
Penyesuaian Pasal Karet 146
Memanfaatkan Celah Hukum 147

Equity Financing 148

Debt Financing 149

Struktur Modal 152
Teori Struktur Modal 153
Teori Pensinyalan 154
Struktur Modal dalam Praktek dan Realitas 155
Menghitung Tingkat Optimal Struktur Modal 155
Besar Beban Operasi 156
Analisis EBIT/EPS terhadap Efek Beban Finansil 157
Besar Beban Finansil 157
Besar Beban Total 158
Efek Struktur Modal terhadap Harga Saham dan Biaya Modal 159
Likuiditas dan Arus Kas 159

Struktur Finansil 160
Ukuran Optimal Beban/Struktur Finansil 161

Valuasi Nilai 162
Corporate Financing vs Investment Banking 163
Pentingnya Valuasi Nilai 164
Valuasi Usaha 164
Komponen Pendapatan 166
Komponen Neraca 167
Komponen Arus Kas 167

Time Value of Money 168
Future Value 169
Future Value Interest Factor for i & n 169
Present Value 169
Present Value Interest Factor for i & n 169
Future Value untuk Anuitas Biasa 169
Future Value Interest Factor untuk Anuitas Biasa 170
Future Value untuk Anuitas Awal 170
Present Value untuk Anuitas Biasa 170
Present Value Interest Factor untuk Anuitas Biasa 170
Present Value untuk Anuitas Awal 170
Present Value untuk Perpetuities 171
Present Value untuk Aliran Arus Kas Variabel 171
Future Value untuk Aliran Arus Kas Variabel 171
Future Value untuk Periode Semesteran atau lainnya 171
Amortisasi Pinjaman 172

Referensi 173
Web 173
e-book 177
Buku 180

Daftar Lampiran

Lampiran – Variabel yang umum dipakai sebagai ukuran stabilitas finansil 181
Jenis data yang digunakan dalam laporan stabilitas finansil beberapa bank sentral (AT-ES) 181
Jenis data yang digunakan dalam laporan stabilitas finansil beberapa bank sentral (GB-TR, ECB, IMF) 182
Variabel yang umum dipakai sebagai ukuran stabilitas finansil 183

Lampiran – Ukuran dan skenario dalam laporan stabilitas finansil global, Okt. 2015 185
Ukuran likuiditas 185
Ukuran utang korporasi di pasar emerging 187
Asumsi dalam skenario gangguan pada pasar aset global 189
Mekanisme transmisi kejutan dalam skenario gangguan pada pasar aset global 190
Asumsi dalam skenario normalisasi yang berhasil 191
Mekanisme transmisi kejutan dalam skenario normalisasi yang berhasil 192

Lampiran – Ukuran Kerentanan Finansil 193
Indikator valuasi risk appetite / aset 193
Indikator ketidakseimbangan non-finansil 194
Indikator kerentanan finansil 195
Indikator Kebijakan Macroprudential 196

Lampiran – Daftar Indikator dalam ISSK Bank Indonesia 197

Lampiran – Profil Cina 199

Lampiran – Jumlah (instrumen) utang Cina menurut emiten, domestik, nasional, internasional, 2015Q2-2015Q4 201

Daftar Tabel

Table 1 – Aktivitas M&A di business intelligence dengan nilai >$100 juta, 2009-2014q1 7
Table 2 – Beberapa indikator kebijakan macroprudential 36
Table 3 – Indikator pengukuran stabilitas sistem keuangan 42
Table 4 – Indikator utama kesehatan finansil ala IMF 45
Table 5 – Indikator tambahan (encouraged) bagi kesehatan finansil ala IMF 45
Table 6 – Indikator parsial dan bobot dalam indeks stabilitas perbankan Republik Ceko 47
Table 7 – Indikator kesehatan finansil ala ECS (Macro-Prudential Indicators) 47
Table 8 – Tiga skenario stabilitas finansil 48
Table 9 – Operasi moneter menurut standing facility 49
Table 10 – Pentingnya likuiditas yang lentur (resilient) 50
Table 11 – Penambahan likuiditas menurut jenis instrumen OPT 50
Table 12 – Penyerapan likuiditas menurut jenis instrumen OPT 50
Table 13 – Nilai ekspor dan impor AS-Cina untuk 5 produk utama, 2014-2015 (US$ juta) 100
Table 14 – Nilai ekspor dan impor AS-Cina untuk produk teknologi tinggi, 2015 (US$ juta) 100
Table 15 – PDB Cina, 2010-2014 dalam milyaran ¥ dan US$ 101
Table 16 – Nilai obligasi pemerintah dan korporasi di Cina, 2002-2015 (US$ milyar) 101
Table 17 – Buletin harga obligasi di pasar uang Hong Kong, 11 Maret 2016 107
Table 18 – Daftar 22 primary dealer di Amerika Serikat, 2014 114
Table 19 – Beberapa veteran primary dealer pilihan Bank Sentral Amerika 114
Table 20 – Daftar 19 primary dealer di Indonesia, 2014-2015 115
Table 21 – Nilai derivatif 25 bank terbesar di AS, Nov. 2015 (US$ milyar) 119
Table 22 – Ringkasan Perlakuan Transaksi Sekuritisasi menurut UK GAAP 145
Table 23 – Jenis data yang digunakan dalam laporan stabilitas finansil beberapa bank sentral (AT-ES) 181
Table 24 – Jenis data yang digunakan dalam laporan stabilitas finansil beberapa bank sentral (GB-TR, ECB, IMF) 182
Table 25 – Variabel yang umum dipakai sebagai ukuran stabilitas finansil 184
Table 26 – Ukuran likuiditas 186
Table 27 – Ukuran utang korporasi di pasar emerging 188
Table 28 – Asumsi dalam skenario gangguan pada pasar aset global 189
Table 29 – Mekanisme transmisi kejutan dalam skenario gangguan pada pasar aset global 190
Table 30 – Asumsi dalam skenario normalisasi yang berhasil 191
Table 31 – Mekanisme transmisi kejutan dalam skenario normalisasi yang berhasil 192
Table 32 – Indikator valuasi risk appetite / aset 193
Table 33 – Indikator ketidakseimbangan non-finansil 194
Table 34 – Indikator kerentanan finansil 195
Table 35 – Indikator Kebijakan Macroprudential 196
Table 36 – Daftar indikator pembentuk ISSK 197
Table 37 – Profil Singkat Cina 199
Table 38 – Indikator Ekonomi Cina, 2011-2017 200
Table 39 – Utang Cina menurut emiten, domestik, nasional, internasional, 2015Q2-2015Q4 202

Daftar Bagan

Figure 1 – Diagram alur hierarki DIKW (Data-Information-Knowledge-Wisdom) 3
Figure 2 – Kontinuum pemahaman dalam konteks DIKW 3
Figure 3 – Proses data mining 4
Figure 4 – Hubungan antara Data, Informasi, dan Intelijen 6
Figure 5 – Analisa eksplorasi data 9
Figure 6 – Taksonomi ketidakpastian 27
Figure 7 – Igloo ketidakpastian 28
Figure 8 – PV perusahaan berutang 32
Figure 9 – Skema indeks kerentanan dan komponennya 37
Figure 10 – Siklus pengawasan macroprudential 38
Figure 11 – Prasyarat bagi antisipasi dan pencegahan ketidakstabilan sistem finansil 39
Figure 12 – Hubungan antara stabilitas sistem finansil dan stabilitas moneter 39
Figure 13 – Keterkaitan antar-variabel dalam BAMBI (Banking Model of Bank Indonesia) 41
Figure 14 – Beberapa indikator pembentuk Indeks Stabilitas Sistem Keuangan (ISSK) 42
Figure 15 – Peran Bank Indonesia dalam menciptakan stabilitas moneter 49
Figure 16 – Bentuk interaksi antara BI, pempus, dan pemda dalam mengendalikan inflasi 51
Figure 17 – Perkembangan aktivitas perbankan internasional 52
Figure 18 – Aset Riel dan Aset Fiktif Bank-bank di AS, 1995–2000 58
Figure 19 – Nilai Derivatif dan Modal 25 Bank AS Ternama (US$ milyar) 59
Figure 20 – CDOs direpresentasikan dalam bentuk building blocks, The Big Short, 2015 60
Figure 21 – Pasar rumah di AS, 1989-2006 61
Figure 22 – Pemetaan proses penularan krisis finansil 2008 62
Figure 23 – Pinjaman sektoral dari Bank of England, 1997-2012 63
Figure 24 – Utang-piutang PIGS 67
Figure 25 – Utang AS ke 4 negara adidaya dan PIGS 68
Figure 26 – Utang Inggris ke 4 negara adidaya dan PIGS 69
Figure 27 – Utang Jerman ke 4 negara adidaya dan PIGS 70
Figure 28 – Utang Perancis ke 4 negara adidaya dan PIGS 71
Figure 29 – Utang Jepang ke 4 negara adidaya dan PIGS 71
Figure 30 – Utang Yunani ke 4 negara adidaya dan PIGS 72
Figure 31 – Utang Irlandia ke 4 negara adidaya dan PIGS 73
Figure 32 – Utang Italia ke 4 negara adidaya dan PIGS 74
Figure 33 – Utang Portugis ke 4 negara adidaya dan PIGS 75
Figure 34 – Utang Spanyol ke 4 negara adidaya dan PIGS 76
Figure 35 – Cadangan Devisa Cina, Des. 1999 – Jan. 2016 78
Figure 36 – Tiga Kekuatan Ekonomi Dunia 79
Figure 37 – Nilai perdagangan Cina dengan negara lain (impor + ekspor) 80
Figure 38 – Nilai tukar bilateral yuan terhadap 3 mata uang dunia, USD, ¥, dan €. 81
Figure 39 – Cadangan devisa Cina dan nilai tukar CNY dan CNH 83
Figure 40 – Selisih CNY dengan CNH, Agustus 2010-Januari 2016 83
Figure 41 – Selisih tajam antara CNY dan CNH berdampak pada lonjakan bunga antar-bank di bulan Januari 2016 84
Figure 42 – Intervensi pasar CNH bisa menyesuaikan bunga CNH dengan CNY, 20151110-20160126 85
Figure 43 – Pasar deposit CNH, Maret 2009 – Des. 2015 86
Figure 44 – Distribusi CNH menurut bank sentral (offshore yuan’s swap line), Nov. 2015 88
Figure 45 – Penyelesaian perdagangan dalam CNH, 2009Q3-2015Q4 89
Figure 46 – Pasar deposit CNH menurut negara, 2014 89
Figure 47 – Beberapa alternatif indikator pertumbuhan ekonomi Cina mengacu pada penurunan yang lebih besar (greater slowdown), 2010–2015 95
Figure 48 – Indeks Saham Gabungan Shanghai (SCI), Mei 2015 sampai 5 Februari 2016 97
Figure 49 – Indeks Saham Gabungan Shanghai, 1 Januari 2015 – 8 Maret 2016 98
Figure 50 – Triple policy trilemma 99
Figure 51 – Pasar obligasi Cina, 2003-2014 104
Figure 52 – Aktivitas perdagangan pasar sekunder obligasi Cina, 2000-2014 104
Figure 53 – Pangsa pasar obligasi Cina menurut jenis obligasi, Des. 2014 104
Figure 54 – Daftar emisi obligasi Panda, 20151010-20160121 106
Figure 55 – Emisi obligasi CNY, 2008-2015 111
Figure 56 – Emisi obligasi CNH, 2008-2015 111
Figure 57 – Asset backed securities di Cina, 2005-2014 112
Figure 58 – Peristiwa bersejarah dan harga minyak mentah, 1861-2014 (US$/b) 121
Figure 59 – Harga minyak mentah Brent (US$), 20040102-20160106 123
Figure 60 – Kelebihan pasokan minyak mentah dunia, 2012q3-2015q3 123
Figure 61 – Distribusi ladang produksi minyak shale AS, April 2015 124
Figure 62 – Suku bunga deposito dan pembiayaan ulang ECB, 2008-Maret 2016 127
Figure 63 – Prediksi nilai tengah suku bunga Federal Funds, Des. 2015-2019 127
Figure 64 – Federal funds target rata (%), 1983-2015 128
Figure 65 – Federal funds rate, 1 Juli 1954-18 Feb. 2016 128
Figure 66 – Skema sumber pendanaan perusahaan 130
Figure 67 – Factors adding to reserves and off balance sheet securities lending program 137
Figure 68 – Multiplikasi Penciptaan Aset Fiktif 143
Figure 69 – Klasifikasi struktur aset, struktur finansil, dan struktur kapital 161


06 20150923 0241 Beijing Widens Opening of ‘Panda-Bond’ Market
2016-03-09 17:44
http://www.wsj.com/articles/beijing-widens-opening-of-panda-bond-market-1442990496
Beijing Widens Opening of ‘Panda-Bond’ Market
Fiona Law, fiona.law@wsj.com
Sept. 23, 2015 2:41 a.m. ET

Hong Kong units of HSBC, Bank of China win approval to issue yuan bonds in China’s domestic market

In approving the issuance of ‘panda bonds’ by two offshore lenders, the People’s Bank of China signaled Beijing is pressing ahead with its market opening. Photo: Andy Wong/Associated Press

HONG KONG-China is allowing two offshore lenders to issue “panda bonds”-yuan-denominated debt sold on its domestic market-a first for Beijing, and a sign it is pressing ahead with its market opening despite recent volatility.

The People’s Bank of China, the country’s central bank, said Tuesday that it had approved the issuance by the Hong Kong units of HSBC Holdings PLC and Bank of China Ltd. of panda bonds worth 1 billion yuan ($157 million) and 10 billion yuan, respectively. It is unclear when they will do so.

Beijing has never before let a foreign commercial bank sell panda bonds in its rapidly growing but largely closed market, which at $6.8 trillion is the world’s third-largest behind those of the U.S. and Japan. It has let in only a few foreign borrowers overall, including the International Finance Corp., part of the World Bank, the Asian Development Bank and German car maker Daimler, which owns Mercedes.

Approval of the banks comes after several months of turmoil in Chinese markets, as investors’ concerns about the country’s economic outlook have grown. The main stock-market benchmark, the Shanghai Composite Index, has tumbled 36% since it peaked in early June, while the yield on China’s 10-year government bond has slumped to 3.35% from 3.66%. Bond yields move inversely to their price.

Seeking to stimulate the economy, the PBOC has cut interest rates five times since last November. That makes this a good time for companies to issue new debt, as their cost of borrowing is now lower than before-though still higher than in, for example, the U.S.

The panda-bond issuance by the two foreign banks will “further expand the range of issuers in [China’s] interbank bond market and widen international commercial banks’ channels to renminbi financing,” the PBOC said, using the official name of the Chinese currency. It will also “benefit the opening up of the bond market and enhance the cross-border use of the renminbi.”

The PBOC approval “could signal the opening-up of an alternative source of funding for global borrowers,” said Helen Wong, HSBC’s Chief Executive for Greater China. Bank of China (Hong Kong) Ltd. ‘s chief executive, Yue Yi, said it marks a milestone for China’s local bond market, and will “help improve our bank’s liquidity management.”

This is likely “just the beginning of a further opening-up of the panda-bond market,” said Yvonne Siew, a partner at law firm Allen & Overy LLP, who expects regulators now to formalize the issuing regime.

Beijing has accelerated the opening of its capital markets in recent months by allowing more foreign investors to buy its stocks and debt through various programs. In part it is seeking to broaden international use of the yuan, as it pushes for the currency to be granted reserve status by the International Monetary Fund.

Concerned that more money could flow out of the country-given worries about the Chinese economy’s health-Beijing is also keen to demonstrate a willingness to attract foreign investment.

Chinese President Xi Jinping, who is currently visiting the U.S., told The Wall Street Journal in an interview this week that development of its capital markets remains a “key goal of China’s reform, which will not change just because of current market fluctuations.”

In mid-July, China removed all hurdles for foreign central banks and sovereign-wealth funds to invest in its domestic debt. Last month, the foreign-exchange regulator granted overseas investors the right to buy more Chinese stocks and bonds.

And this week, on a visit to China, U.K. Treasury chief George Osborne said the two countries will conduct a “feasibility study” to examine how their stock markets could be linked.

in an interview http://www.wsj.com/articles/full-transcript-interview-with-chinese-president-xi-jinping-1442894700
development of its capital markets http://www.wsj.com/articles/despite-slump-chinas-xi-pledges-economic-reforms-1442894460


05 20151130 0002 Panda bonds triumph over dim sum debt after turmoil
2016-03-09 17:34
http://www.ft.com/intl/cms/s/2/511cb962-7f15-11e5-98fb-5a6d4728f74e.html#slide0
Panda bonds triumph over dim sum debt after turmoil
Patrick McGee, November 30, 2015 12:02 am

For China’s bond market, 2015 might be remembered as the year the panda ate the dim sum.

As the International Monetary Fund looks all but certain to include the renminbi in its basket of global reserve currencies, the future of the offshore renminbi “dim sum” bond market (named after the bite-sized food) – renminbi-denominated bonds issued outside china, principally in Hong Kong – looks to be in peril. The onshore market appears to be primed for growth, including the “panda” segment for non-Chinese borrowers.

The dim sum market was launched in 2007 but did not really gain traction until 2010, when restrictions were loosened and international institutions also began to issue renminbi-denominated bonds. For investors, the market was initially seen as a currency play, but in recent years it has been maturing and the breadth of borrowers has widened from top quality state-backed bonds all the way down the ratings spectrum to high-risk single-B issuers.

Dim sum: losing out to panda issuers

Both demand and issuance, however, were dented by the equity rally that began in the summer of 2014, which caused a massive shift in asset allocation away from debt. By April 4, when the Shanghai Composite had risen 88 per cent from the previous summer, the People’s Daily, a state controlled newspaper, declared that the rally was merely “the start of a bull market”. By June 12, stocks had risen by another third, before collapsing by two-fifths within a few weeks.

Bond issuance dried up during the equity boom as companies turned to equity capital markets. According to Dealogic, Chinese corporations raised Rmb122bn in equity from January to June, versus just Rmb58bn a year before. The pricking of the stock bubble wiped out trillions of dollars worth of wealth, hurting all asset classes.

The stock market stabilised in midsummer, but on August 11, just when it appeared bond issuance could recover, the People’s Bank of China surprised everyone by devaluing the renminbi. “That obviously spooked the market quite a bit,” says Ken Wei Wong, head of Asian debt syndicate at Barclays.

Within three weeks of the devaluation, returns on dim sum bonds plummeted from 2.92 per cent for the year to date, to zero, according to Barclays. US dollar investors were nursing losses. Yields in the index, dominated by short-term debt, shot up from 4.40 per cent to above 6 per cent, a record high, reflecting demand for currency risk compensation. While the August devaluation had been relatively small – the currency fell about 3 per cent in a week. It followed the 2014 depreciation of the renminbi – the first time the currency had fallen in a decade. Both events gave investors pause for thought.

“Issuers can fund themselves domestically. They have no need to fund outside of China”

  • Ken Wei Wong

“With what happened in August the entire thing has been derailed from the perspective of the foreign investor,” says Dhiraj Bajaj, portfolio manager at Lombard Odier, a Swiss private bank.

According to Morningstar, a fund tracker, foreign investors withdrew a record $1.78bn from China offshore bond funds in August. “Some funds were decimated,” Mr Bajaj said. “Everyone ran away.”

As of mid-November, dim sum issuance was on track to be just half the Rmb33bn record in 2014, according to Dealogic. Issuance in the offshore market, also shaken by the equity boom and bust, has fallen by 11 per cent, to Rmb443bn.

Once again, the market appears to be finding its footing. But despite Beijing’s reassurances that China will not engage in a competitive devaluation, markets are pricing in a 3 per cent decline for the offshore exchange rate over the coming 12 months, according to Helen Huang, fixed-income analyst at HSBC.

The investors most interested in buying dim sum bonds these days, she says, do not need to worry much about currency risk: Chinese investors.

Issuance and demand could both come back, of course, but the PBoC may have sounded the death knell in September when it opened up the panda market to two foreign banks – the Hong Kong units of HSBC and Bank of China. The move signalled Beijing’s desire to internationalise the use of the renminbi and, eventually, to converge the two exchange rates into one. Within weeks, the governments of South Korea and British Columbia also expressed an interest in selling panda bonds.

A key reason for their new found attention: lower yields. The PBoC has cut benchmark interest rates six times in the past 12 months. “Yields have come down massively in the onshore market, more than the offshore market,” said Barclays’ Mr Wong. “Issuers can fund themselves domestically. They have no need to fund outside of China.”

Dying or not, it is worth keeping an eye on the dim sum market. Suanjin Tan, a portfolio manager and China bond specialist at BlackRock, says it is a good place to find mispriced bonds, as “state-owned companies have been asked to issue in uneconomic terms, just to support the market”.

“We like the fact that we get mispricing,” says Mr Tan. “But it’s ignored by a lot of international investors.”

People’s Bank of China http://www.ft.com/topics/organisations/People%27s_Bank_of_China
panda market to two foreign banks http://www.ft.com/cms/s/0/aeee4b2c-61ac-11e5-97e9-7f0bf5e7177b.html
South Korea and British Columbia http://www.bloomberg.com/news/articles/2015-11-03/south-korea-set-to-become-first-sovereign-issuer-of-panda-bonds

On this story
Slide: Renminbi’s long march to global reserve currency status http://www.ft.com/cms/s/2/609372da-94f7-11e5-b190-291e94b77c8f.html
Video: China’s currency woes in 90 seconds http://video.ft.com/4709579163001/Chinas-currency-woes-in-90-seconds/Markets
Pivotal moment for the renminbi and China http://www.ft.com/cms/s/2/12abb02e-7f02-11e5-98fb-5a6d4728f74e.html
Multilateral bodies set to recalibrate http://www.ft.com/cms/s/2/88afa422-8f7b-11e5-8be4-3506bf20cc2b.html
‘One Belt, One Road’ to turbocharge usage http://www.ft.com/cms/s/2/6f105c2a-7f02-11e5-98fb-5a6d4728f74e.html

On this topic
The Short View: China bears could start to feel isolated http://www.ft.com/cms/s/0/18ac8b4e-e436-11e5-a09b-1f8b0d268c39.html
China admits to renminbi image problem http://www.ft.com/cms/s/2/462ed854-dc54-11e5-a72f-1e7744c66818.html
Trading Post: Forex and renminbi in focus as G20 meets http://www.ft.com/cms/s/0/636e9e68-db9b-11e5-a72f-1e7744c66818.html
Person in the news: Kyle Bass http://www.ft.com/cms/s/0/04a78588-d6ec-11e5-8887-98e7feb46f27.html

IN The Future of the Renminbi
China’s bond market quietly transforms http://www.ft.com/cms/s/2/0ad8ff84-8f7c-11e5-8be4-3506bf20cc2b.html
London rolls out the red carpet for Xi http://www.ft.com/cms/s/2/ee7d4fe2-7f14-11e5-98fb-5a6d4728f74e.html
SDR move seen as vote of confidence http://www.ft.com/cms/s/2/cf10d4ce-7f02-11e5-98fb-5a6d4728f74e.html
Growing in stature despite concerns http://www.ft.com/cms/s/2/cbe051a8-7f02-11e5-98fb-5a6d4728f74e.html


11 20151204 1607 Default looms for 300m yuan bond issued by Sichuan Shengda Group
2016-03-09 18:01
http://www.scmp.com/business/global-economy/article/1886760/default-looms-300m-yuan-bond-issued-sichuan-shengda-group
Default looms for 300m yuan bond issued by Sichuan Shengda Group
Daniel Ren, Shanghai, ren.wei@scmp.com
PUBLISHED : Friday, 04 December, 2015, 4:07pm
UPDATED : Friday, 04 December, 2015, 8:02pm

Investors are due to be repaid this weekend on debt issued six years ago to fund a hydropower project in Sichuan

A woman walks past a board showing the length and annual yield rates of finance products, outside a shop in ShanghaiOn November 18. A year after China’s financial regulators squared up to the systemic perils of “shadow banking”, the threat is shifting to a booming corporate bond market, and risky borrowers’ debt is finding its way into products aimed at retail investors. Photo: Reuters

A corporate bond approved by the nation’s top economic planner is set to default, provoking ire among investors who might take legal actions against the issuer suspected of hiding key information in the prospectus.

Sichuan Shengda Group won’t be able to pay bondholders principals and interests amounting to more than 300 million yuan Saturday when the notes expire, according to its general manager Li Chuanrong.

He told the South China Morning Post in a telephone interview that a delay of the payment was certain while the company was trying to bring new investors including an A-share-listed firm to bail it out.

“A lot of details about the debt restructuring deal will be discussed, but the outlook is uncertain,” he said. “It will be some time before all the parties involved work out a solution.”

The default adds to evidence that the debt woes facing China’s slowing economy is exacerbating
Zhou Ling, a hedge fund manager at Shanghai Shiva Investment

Amid an economic slowdown, the failure by Sichuan Shengda to pay back investors could further expose low business morale and corruption scandals to the investment community.

Shengda issued the six-year bonds after receiving an approval from the National Development and Reform Commission (NDRC) three years ago to fund its hydropower project in Sichuan.

Bondholders have the right to sell back the six-year debts on December 5, 2015.

It will become the first bond default that was under the oversight of the NDRC.

A bondholder who spoke on condition of anonymity, said there were suspicions that the bond sale was conducted without providing investors truthful and complete information about the company’s operations.

“We found that Shengda hid some information about its business operations which were supposed to be published in its prospectus,” said a bondholder who declined to be identified. “Bond defaults in China seemed to not only arise from a slowing economy, but wrongdoings committed by some corporate officials.”

He added that Shengda, saddled with massive debts and technically insolvent, was suspected of misusing the proceeds to fund its brake hub manufacturing business.

The bondholders have hired a law firm to handle legal affairs related to the repayment while the source said they wouldn’t rule out possibility of suing Shengda.

Analysts said the default of a NDRC-approved bond reflected the severity of China’s debt woes, which provided a snapshot of the mainland’s lacklustre economic performance.

On the mainland, the bond market is fragmented with the NDRC, the central bank and the securities regulator having power to review and approve corporate bond sales on the interbank market and the stock exchanges.

The NDRC is responsible for the issuance and supervision of non-financial corporate bonds, which are issued by institutions affiliated to central government departments, local government-related institutions, state controlled enterprises, and other large-sized state-owned entities.

The planning agency won’t grant approvals unless the applicants have manufacturing projects that are in compliance with the country’s industrial development guidelines.

“The default adds to evidence that the debt woes facing China’s slowing economy is exacerbating,” said Zhou Ling, a hedge fund manager at Shanghai Shiva Investment. “It is likely to open a floodgate for a huge number of bond failures including those approved by the NDRC.”

Meanwhile, the NDRC ordered local economic planning agencies in March to deploy “steely defence” against any potential default this year as a way to maintain economic stability

07 20151211 0744 South Korea to Offer ‘Panda Bonds’ in China Onshore Markets
2016-03-09 17:49
http://www.wsj.com/articles/south-korea-to-offer-panda-bonds-in-china-onshore-markets-1449832233
South Korea to Offer ‘Panda Bonds’ in China Onshore Markets
Gregor Stuart Hunter, gregor.hunter@wsj.com
Dec. 11, 2015 7:44 a.m. ET

South Korea will become the first sovereign issuer of the yuan-denominated debt in mainland China

A currency dealer works in front of electronic boards showing the exchange rates between the Chinese yuan and South Korean won at a bank’s dealing room in Seoul in August. Photo: Reuters

South Korea’s government is set to become the first sovereign issuer of a yuan-denominated bond in China’s onshore markets in the coming week, the latest sign of the growing acceptance of the Chinese currency in international markets.

The move is the latest effort to boost financial ties between South Korea and China, its biggest trading partner. South Korea’s stock exchange also said Friday it would research a plan to link trading with its Shanghai counterpart.

The so-called panda bond issuance is expected to be completed Tuesday and will serve as a pricing reference for future sales of debt by Korean corporations in China, said Heenam Choi, deputy minister for international affairs at the South Korean ministry of strategy and finance.

“It will provide a benchmark to the next issuers from Korea. We hope this will clear the way for them,” he said.

The deal comes after the International Monetary Fund late last month approved the inclusion of the Chinese yuan in the basket of currencies backing its special drawing rights.

South Korea’s government met with investors this week in Shanghai and Beijing to tap the Chinese market with a three billion yuan ($465 million) three-year bond. Citibank, HSBC, Standard Chartered, Goldman Sachs and Bank of Communications have roles on the deal.

Separately, Korea Exchange said it had agreed to study a plan to link its stock and bond markets with the Shanghai Stock Exchange.

“The Korea and Shanghai stock exchanges agreed to research to link stock and bond trading as a longer term project,” Korea Exchange said in a statement.

The move follows similar steps by Hong Kong, which opened a trading link with Shanghai in November last year. Deutsche Börse last month launched a trading venue for yuan-denominated securities in Europe, while London is studying plans for a similar link.

Panda bonds are yuan-denominated debt instruments issued in the onshore Chinese fixed-income markets by a foreign entity.

Over the past few years, foreign companies and governments have sought to tap the so-called dim sum market, issuing offshore yuan-denominated bonds in Hong Kong. Opening onshore markets has proven more slow, owing to tight restrictions on the Chinese currency which have become looser during the past few years.

The first panda bonds were issued by the International Finance Corp. and the Asian Development Bank in 2005, but only a handful of transactions have taken place since then. A total of $1.8 billion has been raised in the panda-bond market, according to Dealogic data. Most of this issuance has come in the past two years from companies such as HSBC Holdings PLC, Standard Chartered PLC and Mercedes owner Daimler AG of Germany.

South Korea’s economic links with China will likely grow further as a recently signed free-trade agreement between the two countries comes into effect, said Ken Hu, chief investment officer for fixed income, Asia-Pacific, at Invesco Ltd, which manages $791.1 billion of assets.

“As their trades are increasingly settled in yuan, we expect their cross-border investments and financing will also [be mostly] in yuan,” he said. Because of its trade links, South Korea could in time become a key member of a yuan bloc in which the currency is used for both trade and financing, Mr. Hu said.

Other government issuers are also seeking access to this market. British Columbia is also seeking to issue a panda bond, receiving approval from the Chinese government for a six billion yuan panda bond program last week.

South Korea’s panda bond sale comes as the yuan steadily weakens against the U.S. dollar, with the People’s Bank of China’s official reference rate-which determines the level at which the currency can trade-depreciating during the past five days, hitting a four-year low.

-Min Sun Lee in Seoul contributed to this article

approved the inclusion http://www.wsj.com/articles/imf-lifts-chinese-yuan-to-elite-lending-reserve-currency-status-1448903067
trading link http://www.wsj.com/articles/chinas-stock-connect-hasnt-tapped-into-foreign-money-1447619401
trading venue http://www.marketwatch.com/story/deutsche-boerse-seals-jv-with-chinese-exchanges-2015-05-27
studying plans http://www.marketwatch.com/story/deutsche-boerse-seals-jv-with-chinese-exchanges-2015-05-27
so-called dim sum market http://www.wsj.com/articles/chinese-bond-investors-move-offshore-1445325839
panda-bond market http://www.wsj.com/articles/beijing-widens-opening-of-panda-bond-market-1442990496
receiving approval https://news.gov.bc.ca/releases/2015FIN0075-002009


04 20151215 1401 South Korea ‘panda’ bond five times subscribed
2016-03-09 17:20
http://www.ft.com/cms/s/0/9d97a2a6-a31a-11e5-bc70-7ff6d4fd203a.html#axzz42Okmtqvk
South Korea ‘panda’ bond five times subscribed
Jennifer Hughes in Hong Kong
Last updated: December 15, 2015 2:01 pm

Chinese one-hundred yuan banknotes are stacked for a photograph at the Korea Exchange Bank headquarters in Seoul, South Korea, on Thursday, Feb. 27, 2014
©Bloomberg
Building up the renminbi: the currency is becoming an increasingly important unit of trade settlement

The first sovereign “panda” bond attracted bids for five times the paper on offer in a deal that marked another step in Beijing’s efforts to internationalise the renminbi and broaden the pool of investment products for domestic investors.

South Korea sold Rmb3bn ($464m) in three-year notes at 3 per cent, the tight end of its estimated 3-3.5 per cent range. Panda bonds are renminbi-denominated debt sold by foreigners into China’s bond markets.

Those onshore bond markets are the third largest, after the US and Japan, with more than $6tn of debt outstanding.

But international borrowers have been kept out of that pool of capital, and been limited to selling renminbi-denominated bonds in the far smaller offshore market, where the paper is known as “dim sum” debt.

But the panda market is increasingly being seen as an alternative to dim sum issuance. Companies this year have sold a total of Rmb7bn in pandas – more than the Rmb6bn sold during the previous decade.

Duncan Phillips, head of Asia debt syndicate for Citigroup, a bookrunner on the deal, said the demand showed Chinese investors’ growing interest in foreign borrowers.

“We expect to see further issuance across several sectors, including sovereign, bank and corporate issuers, as the market develops further,” he added.

Korea’s test of demand for sovereign panda paper is a milestone for the market. This year, HSBC became the first foreign bank to sell pandas and Daimler, the German automaker, was the first non-financial company to do so, in 2014.

Choi Hee-nam, finance vice-minister, said South Korea was “honoured” to have been the first sovereign to sell panda debt. “This new issue sets an important benchmark for Korea and for further issuance,” he said.

The deal was in large part designed to pave the way for Korean companies to tap the panda market by setting a benchmark.

Some people involved in the deal said investors appeared as interested in the prospect for further panda issuance as in the country’s risk profile.

Won-denominated three-year South Korean debt yields 1.73 per cent. China’s paper, having fallen sharply in recent months, offers 2.74 per cent. Both countries are rated double A minus by Standard & Poor’s and the equivalent by Moody’s.

Analysts foresee a steady rise in issuance if Beijing produces a set of rules for the debt. So far each deal is individually approved.

Standard Chartered said that, if progress continues at this pace, as much as Rmb7tn in panda debt could be issued in the next five years.

The move to increase panda bond activity is another sign of China’s willingness to gradually open its capital markets to more international participation. Beijing expanded access to its onshore bond markets for foreign institutions and central banks this year.

sovereign http://www.ft.com/intl/cms/s/0/7f4c02b6-9d7e-11e5-bfed-a24713ecdd4f.html#axzz3uBeMdUBU
South Korea poised to issue first sovereign panda bond – FT.com

bond markets http://www.ft.com/intl/cms/s/2/0ad8ff84-8f7c-11e5-8be4-3506bf20cc2b.html#slide0
China’s bond market quietly delivers revolution in liberalisation – FT.com

renmimbi- http://www.ft.com/intl/reports/future-renminbi
The Future of the Renminbi – FT.com

first foreign bank to sell pandas http://www.ft.com/intl/cms/s/0/aeee4b2c-61ac-11e5-97e9-7f0bf5e7177b.html#axzz3uO9XG2Ua
HSBC to sell ‘panda bond’ in a first for foreign banks in China – FT.com


02 20151223 1720 Panda bonds alluring in China’s booming bond market
2016-03-09 17:10
http://www.scmp.com/business/markets/article/1894090/panda-bonds-alluring-chinas-booming-bond-market
Panda bonds alluring in China’s booming bond market
Jing Yang jing.yang@scmp.com
PUBLISHED : Wednesday, 23 December, 2015, 5:20pm
UPDATED : Wednesday, 23 December, 2015, 5:20pm

An electronic display showing the length and annual yield rates of wealth management products is seen in Shanghai, China as investors consider putting money in Panda bonds in the country’s thriving bond market. Photo: Reuters

More reforms are needed in China’s domestic bond market to captivate foreign investors, and the yuan’s inclusion into the International Monetary Fund’s elite SDR basket was only an inch ahead in a mile-long journey.

With over 45 trillion yuan (HK$53 trillion), China’s bond market ranks the third largest in the world after the US and Japan. Riding on the tailwind of enormous deregulation and a credit easing cycle, new issuances have surged 73 per cent year-on-year to 17 trillion yuan between January and October. Yield curves are also inching down in a typical sign of a bond bull market.

Yet the party has been largely celebrated at home in China. Foreign ownership in the colossal market stands at a pitiful 2 per cent.

The IMF’s seal of approval last month to incorporate the yuan in the Special Drawing Rights basket, a notional currency rarely used in daily transactions, may spur foreign central banks to allocate more assets in yuan, but private investors would hardly budge on the pure basis of the IMF’s nod.

An SDR inclusion was ranked as the least important driver of investment decisions, according to a survey by BNP Paribas, which polled 44 institutional investors in both the private and public arena.

Other factors, including regulatory risks, information asymmetry vis-à-vis local players, and restrictions on investment quotas, were ranked far more important than the IMF’s symbolic move.

Ken Hu, chief investment officer at Invesco’s Asia Pacific fixed income department, said he would love to hold more Chinese treasury and sovereign bonds should the firm get more quota.

Atlanta-based Invesco, which manages some US$791billion, is applying for a quota in the Renminbi Qualified Foreign Institutional Investors programme, having obtained US$125 million in the Qualified Foreign Institutional Investors scheme.

“Yuan is probably the second strongest currency after the US dollar. It is also a high-yield currency, given the interest rates in China are still a lot higher than other major economies,” he said.

“When the yuan falls, other emerging market currencies will fall even further. So to some extent it is like a natural hedge. Plus it offers the benefit of diversification for foreign institutional investors,” Hu added.

A new breed of bonds is arising with a groundswell of promise to change the landscape in the domestic fixed income market – the so-called panda bonds issued by offshore entities.

“Foreign investors who wish to gain exposure to China’s fixed income market may find a panda bond a more comfortable alternative, as the issuers are typically credits familiar to international investors,” said Becky Liu, senior rates strategist at Standard Chartered Bank (HK).

Standard Chartered in early December issued 1 billion yuan of panda bonds, following the steps of HSBC, Bank of China (Hong Kong) and China Merchants Holdings (Hong Kong).

The Republic of Korea was among the first sovereign issuer to tap panda bond funding and the Canada’s Province of British Columbia is also in the pipeline of its issuance.

Still, pandas have a hard time attracting foreign corporate issuers, due to discrepancies in accounting rules and uncertainty in the regulatory regime.

Agnes Tsang, a consultant at law firm Allen & Overy, said authorities would roll out a new set of rules that simplifies the procedures after enough testing cases prove there is solid demand for panda bonds. “But the absence of legal clarity has dented companies’ enthusiasm to tap the new market.

“It has become a bit of a chicken-and-egg issue,” she said.

Evan Goldstein, global head of renminbi solutions at Deutsche Bank, said unfamiliarity with the onshore credit rating system and other fundraising alternatives have contributed to issuers looking elsewhere.

“Many European multinationals have their medium term note programmes in place. For the time being, they will be more inclined to issue notes on the back of those programmes based on accounting rules that they are accustomed to,” he said.


10 20160101 1400 Tough times for China’s dim sum bonds
2016-03-09 17:59
http://www.scmp.com/business/companies/article/1896849/tough-times-chinas-dim-sum-bonds
Tough times for China’s dim sum bonds
Jin Yang
PUBLISHED : Friday, 01 January, 2016, 2:00pm
UPDATED : Friday, 01 January, 2016, 2:00pm

Headwinds for offshore yuan bond market due to slow economy, regulatory concerns

One-hundred Yuan notes are seen at the Korea Exchange Bank in Seoul as headwinds blow through the offshore renmimbi bond market into 2016. Photo: Reuters

Headwinds are expected to blow through China’s offshore renminbi bond market next year, as unfavourable economic and regulatory factors that sent the market to a six-year low persist.

The offshore renminbi bond market, also known as dim sum bonds, has been caught between a rock and a hard place this year. Massive deregulation in the onshore renminbi bond market and rounds of monetary easing by the People’s Bank of China since late last year have lured Chinese companies, especially property developers- the backbone of the dim sum bond issuances- to raise funds back home.

The yuan fixing reform in August that resulted in a 3 per cent devaluation of the currency, and the ensuing depreciation bias, coupled with the likelihood of more interest rate hikes in the US, have removed the glow in issuing dim sum bonds.

Total issuances plunged 79 per cent year-on-year in the first 11 months to US$5.1 billion, the lowest level since 2010, according to Dealogic data.

Looking ahead, the bouts of adversity will continue with no clear signs of abating, experts say.

“I don’t think the fundamentals that made the dim sum bonds less attractive this year will change vis-à-vis the onshore market,” said Evan Goldstein, global head of renminbi solutions at Deutsche Bank.

In addition to difficult fundamentals, a shorter maturity profile is compounding the challenges facing the dim sum bond market, according to Becky Liu, senior rates strategist at Standard Chartered Bank.

Liu calculated 42 per cent of the outstanding balance will mature by the end of next year.

“On the back of strong redemption, there’s a possibility that the overall dim sum bond market size may be shrinking next year,” she said.

Foreign banks and companies have been tapping dim sum bonds more, with a goal to transfer the proceeds into US dollars through arrangements called cross currency swaps that come cheaper than raising funds in US dollars directly. But such a growth momentum so far could not offset dwindling issuances by Chinese corporates, said ratings agency Moody’s.

Foreign issuers account for 21 per cent of the total outstanding balance, with the rest Chinese companies, banks and governments.

Still, a new breed of issuers may arise on the horizon over time to fill the gap – governments and companies in regions identified by Beijing’s so-called One Belt, One Road initiative, said Ken Hu, chief investment officer, fixed income, Asia Pacific at Invesco, which manages US$791 billion.

“If history is any lesson, the One Belt One road countries will need yuan liquidity,” said Hu, referring to the roots of the 1997 Asian financial crisis.

In the 1980s, Asian countries started adopting the yen as a payment currency, but the financing currency was still by and large the US dollar, which was weak at the time.

“Such massive currency mismatch caused severe troubles for the Asian economies in the 1990s when US started tightening credit, leading up to what we now know as the Asian financial crisis,” Hu said.

Invesco subscribed to the long-term offshore renminbi bonds issued by the Ministry of Finance in November.

“We take a long term view and favour the long end of the yield curve,” said Hu, adding that it was time to ditch the term “dim sum” as offshore bonds have taken hold in a range of offshore yuan clearing centres outside Hong Kong.


01 20160110 2221 Chinese property developers rush to print private Panda bonds
2016-03-09 17:08
http://www.reuters.com/article/china-debt-bonds-idUSL3N14V1GR20160111
Chinese property developers rush to print private Panda bonds
Markets | Sun Jan 10, 2016 10:21pm EST

HONG KONG, Jan 11 (IFR) – Overseas-incorporated Chinese property developers are joining the rush to issue Panda bonds in an effort to lock in more attractive funding costs in China’s onshore market.

Hong Kong-listed Country Garden Holdings, incorporated in the Cayman Islands, led the way at the end of last year with an offering of Rmb1bn five-year onshore bonds via an offshore entity.

Notably, the paper was issued on the China Securities Regulatory Commission-supervised stock exchange market, rather than the interbank bond market, where five previous Panda bonds, including a sovereign offering from South Korea, were printed after getting the nod from the People’s Bank of China.

Country Garden also chose a private placement for its debut Panda offering. The format allowed swifter execution as it does not require regulatory clearance and is not subject to a debt cap.

“The Shanghai Stock Exchange has been encouraging innovations in the capital market, and the feedback we got from them is that private placement of Pandas is doable, but public offerings are not viable for now as a public offering has to go through the CSRC,” said a Shanghai-based bond underwriter.

The CSRC removed many of the barriers to corporate bond financing last year. As a result, private placements of corporate bonds only require pre-registration with stock exchanges.

Unlike public offerings, private placements have no issuer profitability requirement and are exempt from a debt-ratio restraint, which limits outstanding debt to 40% of an issuer’s net assets. Flurry of issues

The relaxation of fundraising restrictions and sustained monetary easing triggered a flurry of onshore bond issues from the property sector last year. Country Garden raised Rmb14bn from bond offerings through one of its onshore subsidiaries, Zengcheng Country Garden Property Development, in 2015.

The recent liberalisation of Panda bonds reinforced the appeal of onshore financing for Chinese developers.

“We expect to see more Chinese developers, which operate onshore, but are incorporated offshore, issue Panda bonds in the stock-exchange markets to take advantage of cheaper funding costs,” said a Beijing-based underwriter, who handled Country Garden’s trade.

With the support of ample liquidity, onshore renminbi bonds trade at much lower yields than are available offshore. Benchmark 10-year Chinese government bonds were traded around 2.85 percent on Friday. In the offshore renminbi market, similar government securities were quoted at 3.647-3.572 percent.

Country Garden sold its first five-year Panda bonds for 4.99 percent. Its offshore 2021 $750 million notes were quoted at 6.1/6.5 percent on Friday on Tradeweb.

Apart from Country Garden’s registered 20 billion renminbi Panda bond plan with the SSE, at least three more offshore incorporated Chinese developers are working on such issues.

Shimao Property Holdings plans to raise up to 20 billion renminbi from a private placement of Panda bonds on the Shanghai Stock Exchange. The first batch will fetch no less than 2 billion renminbi and will be issued in mid-January with a tenor of five years, according to a syndicate banker with China Securities, the sole lead underwriter on the placement.

Powerlong Real Estate Holdings, also incorporated in the Caymans, has got approval to raise 6 billion renminbi through a private placement of corporate bonds via the SSE.

Hopson Development Holdings, incorporated in Bermuda, has applied for a private placement of Rmb15bn corporate bonds through the SSE. (Reporting by Ina Zhou; Editing by Vincent Baby and Daniel Stanton)


08 20160125 1935 China’s Panda Bonds Expected to Boom
2016-03-09 17:53
http://english.cri.cn/12394/2016/01/25/1821s914546.htm
China’s Panda Bonds Expected to Boom
Xu Leiying, 2016-01-25 19:35:53

Kazuhiro Nomoto, The Japan Bank for International Cooperation’s representative in China, takes an interview with CRI on Monday, January 25, 2016 in Beijing. [Photo: CRIENGLISH.com]

Related: Challenges Exist as Panda Bonds Expected to Boom

Industry insiders say Panda bonds are set for a big expansion.

The Renminbi-denominated bonds from a non-Chinese issuer, are expected to see a boom as the Chinese government pushes the further internationalization of its currency.

For more on this, CRI’s Qizhi has more.

A forum about the development of Panda Bonds and China’s credit rating industry took place in Beijing, Monday.

Simon Choi, CEO of Dagong Hong Kong, a subsidiary of Dagong Global Credit Rating, said after the forum, that he believes more and more foreign entities will join the list of Panda Bonds issuers.

“I expect the Panda Bonds will grow substantially in 2016. As we expect the interest rates in China to fall further and RMB to become more increasing global, Panda Bonds become a good funding source for many foreign institutions. ”

The first Panda Bond was issued in 2005, when the Chinese authorities allowed the World Bank’s International Finance Corp. and the Asian Development Bank to sell 2.13 billion yuan financial bonds.

The issuance was widely seen as a major step towards opening up China’s domestic bond market.

However, in the past decade, people did not see a crowded market for Panda Bonds and actually many of the issuers were Chinese state-owned entities such as China Development Bank.

Last year saw a turning point in the development of Panda Bonds – only days after Renminbi was added to the IMF’s Special Drawing Rights basket, the South Korean government announced that it would issue 3 billion yuan worth of Panda Bonds, the first sovereign government to sell such bonds.

The International Finance Corp. predicted that the market will surpass 320 billion yuan in the next five years.

Kazuhiro Nomoto, The Japan Bank for International Cooperation’s representative in China, adds that, in addition to Panda Bonds, China’s bond market as whole has a lot of room to grow.

“Chinese economy now in term of GDP is twice as big as Japan’s, but its bond market is still smaller than Tokyo. So there is big room for China to grow. And also if you look carefully at the bond market in China, most of the bonds are government-related, it is either (issued by) central bank, central government, provincial government, or so many from CDB, China Development Bank. Not many companies or commercial banks issue bonds domestically.”

Nomoto notes that Panda Bonds, as a kind of international financial product, will benefit both international investors and domestic players.

“By inviting these foreign issuers, I think it is introducing Chinese investors to take more how to deal with this commercial risk to the bond market. I think that is a big step for Chinese investors. ”

Simon Choi with Dagong Hong Kong also noted that Hong Kong’s banking and financial institutions will be the first to benefit from the Panda Bonds. All three major banks in Hong Kong: HSBC, Standard Charted and Bank of China (Hong Kong) all successfully issued Panda Bonds last year.

For CRI, I am Qizhi.

http://english.cri.cn/12394/2016/01/25/1821s914546_1.htm
Guan Jianzhong, chairman of Dagong Global Credit Rating Group, gives a keynote speech at the Forum of Panda Bond and Internationalization of Bond Market of China on Monday, January 25, 2016 in Beijing. [Photo: CRIENGLISH.com]


03 20160127 The lowdown: Panda bonds
2016-03-09 17:15
http://www.globalcapital.com/article/w7lmrj29cmkx/the-lowdown-panda-bonds
The lowdown: Panda bonds
Lorraine Cushnie, 27 Jan 2016

Panda bonds were thrust back into the limelight when the market was reopened by China in 2015 with many high profile issuers lining up to sell deals. But what are Panda bonds and why should you care? Here’s GlobalRMB’s quick guide to all you need to know.

What is a Panda bond?
A Panda bond is a renminbi denominated bond sold onshore in China by a non-Chinese issuer. The first Panda bonds were issued in 2005 by International Finance Corp and the Asia Development Bank. After that there was only sporadic issuance until the People’s Bank of China (PBoC) reinvigorated the market in September 2015. Since then nine issuers have sold Panda bonds (see table below) and the pipeline is growing fast.

Is it really that simple?
With China it is always a bit more complicated. At the moment there are no formal guidelines on Panda bond issuance so while issuers including South Korea and the Province of British Columbia have sold trades, so have Powerlong Real Estate Holdings and Shimao Property Holdings.

But aren’t the last two Chinese companies?
Yes. And no. Powerlong and Shimao are what is known as red chip companies – firms based in China but incorporated internationally and listed in Hong Kong. While technically they can issue Panda bonds and are foreign issuers, they have been coined ‘fake’ Pandas by some in the market. Not to mention that this is probably not what the Chinese authorities had in mind when the opened up their domestic bond market to overseas issuers.

So when will the formal rules be published?
Good question. It was meant to be in December 2015 or January 2016 but the feeling is that any guidelines will not now appear until after Chinese New Year as Beijing has been a little distracted by the volatility in the renminbi.
So far any issuer that has wanted to sell a Panda bond has needed to liaise with the regulator on their specific transaction. Approvals are made on a case-by-case basis as are decisions on whether borrowers can take the proceeds offshore or not.

Why can’t issues do what they want with the proceeds?
China has very strict capital controls in place for controlling the currency that comes in and out of the country. Many issuers that have sold offshore renminbi (dim sum) bonds had to get permission if they wanted to bring the renminbi onshore. Most of the recent Panda bond issuers have been able to take their proceeds offshore but GlobalRMB understands that Shimao was prevented. This could be an isolated case, but China is aggressively trying to stem the flow of money leaving the country in the face of the renminbi’s depreciation.

What else?
It’s worth remembering that China’s bond market is very fragmented. It is divided between the interbank bond market and the exchange market. The former is regulated by the PBoC while the latter is governed by the China Securities Regulatory Commission.
The types of bonds available on each exchange are different as well with the interbank bond market mostly made up of government bonds, central bank notes and financial bonds. The exchange market, on the other hand, houses mostly non-financial corporate bonds and is slowly gaining traction.
So British Columbia and Bank of China Hong Kong have sold their Panda bonds in the interbank market, while the red chips have sold there’s in the exchange market.
And as always there is competition between the regulators but so far the PBoC has been leading the charge.

So what does this mean for dim sum bonds?
Dim sum bonds have been in the doldrums since Q4 2015 but that has more to do with the fact that the currency is depreciating and Chinese monetary easing means it is much cheaper to issue bonds onshore (the majority of dim sum issuers are Chinese). Also the basis swap doesn’t look that favourable for issuers wanting to swap renminbi into dollars or euros.
But the market could come back if funding conditions improve. It has advantages over Panda bonds including the fact there’s no need to seek approval from Chinese regulators if you want to issue a dim sum bond. And waiting for sign off is one of the problems holding back Panda issuance.

So how big could this market be?
Well in January 2016, Deutsche Bank predicted issuance of Rmb20bn ($3bn) in 2016 and Rmb150bn by 2020.
If only I could read more about Panda bonds.

Luckily GlobalRMB can help you out with that:
British Columbia places proceeds offshore for first sub-3% Panda http://www.globalcapital.com/article/w5b3rvlmll2w/bc-places-proceeds-offshore-for-first-sub-3-panda
Red chip Pandas in doubt as BC roars http://www.globalcapital.com/article/w522b0ngg7w8/red-chip-pandas-in-doubt-as-bc-roars
Kexim plans to issue Panda bond in 2016 http://www.globalcapital.com/article/w3zccbct1fm5/kexim-plans-to-issue-panda-bond-in-2016
More issuance, investor upgrades are needed for Panda bonds, says BoCom http://www.globalcapital.com/article/vqqc9rm5mwfn/more-issuance-investor-upgrades-are-needed-for-panda-bonds-says-bocom
South Korea prices first sovereign Panda bond http://www.globalcapital.com/article/vmmh17g8x3z2/south-korea-prices-debut-sovereign-panda-bond
BOCHK pips HSBC to the post as both price Panda debuts http://www.globalcapital.com/article/tjk5j75r55p1/bochk-steals-hsbcs-thunder-to-price-landmark-panda
China opens Panda bonds to Red Chip companies http://www.globalcapital.com/article/vz78l0psyzfq/china-opens-panda-bonds-to-red-chip-companies
HNA Group Intl mulls Panda bond in exchange market http://www.globalcapital.com/article/w1gldr27n9l3/hna-group-intl-mulls-panda-bond-in-exchange-market

South Korea http://www.globalcapital.com/article/vmmh17g8x3z2/south-korea-prices-debut-sovereign-panda-bond
Province of British Columbia http://www.globalcapital.com/article/w5b3rvlmll2w/bc-places-proceeds-offshore-for-first-sub-3-panda
red chip companies http://www.globalcapital.com/article/w522b0ngg7w8/red-chip-pandas-in-doubt-as-bc-roars
Shimao was prevented http://www.globalcapital.com/article/w522b0ngg7w8/red-chip-pandas-in-doubt-as-bc-roars
Bank of China Hong Kong http://www.globalcapital.com/article/tjk5j75r55p1/bochk-steals-hsbcs-thunder-to-price-landmark-panda
Deutsche Bank predicted issuance of Rmb20bn ($3bn) in 2016 http://www.globalcapital.com/article/w1s0t952qytr/panda-supply-to-reach-rmb20bn-in-2016-deutsche


09 20160301 0012 China’s IFRS rule leaves little incentive for US banks to get into Panda bonds
2016-03-09 17:55
http://www.cnbc.com/2016/03/01/chinas-ifrs-rule-leaves-little-incentive-for-us-banks-to-get-into-panda-bonds.html
China’s IFRS rule leaves little incentive for US banks to get into Panda bonds
Tuesday, 1 Mar 2016 | 12:12 AM ETReuters

China proposed landmark new rules last year aimed at allowing more foreign issuers to tap its vast bond market as well as giving domestic investors a chance to diversify away from its volatile stock market.

A handful of issuers – including HSBC and Standard Chartered Bank – have since issued so-called Panda bonds using the draft rules as a template. But there is an unexpected side effect.

Issuers must provide financial statements for investors drawn up under International Financial Reporting Standards (IFRS). That effectively excludes U.S. firms – a setback to making the yuan a more international currency – and a frustration for debt bankers looking to develop this market.

Cheaper alternative funding options also mean there is little incentive now for U.S. firms to go to the expense of converting their accounts for the sake of a Panda bond issue.

This is where the PBOC wants you to invest

“To regurgitate the entire financial report into a different accounting standard would not make any commercial sense for any issuer at this stage,” said Jane Jiang, head of Allen & Overy’s regulatory group based in Beijing. “This is a large stumbling block.”

The financial power of U.S. firms, which Standard & Poor’s figures show carry the highest outstanding amount of corporate debt in the world after China, is crucial to adding depth to new markets.

IFRS is a set of global accounting rules popular in Europe and parts of Asia. Most U.S. firms use Generally Accepted Accounting Principles (GAAP) for their bookkeeping.

“Europeans have more opportunities to tap the Panda bond market since they file under IFRS,” said Keith Pogson, a partner in EY. “An American issuer would need a sizeable amount of work to convert their U.S. GAAP accounts into IFRS to make the specific filing.”

Cheaper financing

China’s new rules for Panda bonds were drafted in the run up to a November decision by the International Monetary Fund to include the yuan in its basket of reserve currencies by October.

Apart from HSBC and Standard Chartered, South Korea and the Hong-Kong based unit of Bank of China (HK) have issued Panda bonds since the draft rules were issued.

Some issuers willing to test the onshore market are likely to be drawn from the offshore yuan debt market, saidWarut Promboon, Hong Kong-based chief rating officer at Dagong rating agency, because onshore financing is cheaper.

For example, the offshore unit of Chinese property firm Country Garden sold a five-year Panda bond yielding 4.99 percent in December 2015.

That was about 2 percentage points lower than the yield at the time on higher-rated Longfor Properties 2018 offshore yuan bonds.

In February, developers Agile Property and Country Garden, both indicated plans to issue Panda bonds this year

The inaugural Panda bond was issued in 2005 by the International Finance Corp, a private sector arm of the World Bank, with a 1.13 billion yuan deal and it plans to be a frequent issuer.

Before the new rules were drafted last year, only global development institutions were allowed to issue Panda bonds with the proceeds useable in China only. Before the draft rules, only a handful of Panda bonds had been issued.

The new rules have not been formally endorsed, but have been put into practice. They allow for a broader base of private issuers, including corporations, and would allow for the bond proceeds to be transferred abroad.

The IFC estimates it will be a $50 billion market by 2020.

Options

For now, ultra-low interest rates in Europe and Japan and simpler rules in those markets are discouraging yuan bond issuance more broadly.

“The cost to issue is higher in yuan than in euros. U.S. companies are currently going for euro debt issuance,” said Mark Cernicky, London-based managing director for global fixed income at Principal Global Investors.

And fundamentally, few American companies need to issue a bond in yuan, he said.

“There are very few American companies that have significant assets in yuan that a yuan bond would help them hedge,” he said.

HSBC http://www.cnbc.com/2016/03/01/chinas-ifrs-rule-leaves-little-incentive-for-us-banks-to-get-into-panda-bonds.html
This is where the PBOC wants you to invest http://www.cnbc.com/2016/02/25/chinas-central-bank-wants-private-capital-for-green-investment.html


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