dim sum 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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Krisis Finansil Cina
 


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


SECTION: dim sum

Contents
05 20150421 0327 UPDATE 1-Jumbo China bond sale in Hong Kong meets strong demand
02 20150520 1952 China MOF dim sum bond sale sees hot demand
04 20150520 0334 UPDATE 1-China completes sale of 14 bln yuan bonds in Hong Kong
03 20150826 1726 China finance ministry to auction 30bn yuan 5-year bonds
01 20150914 0909 China 2-year finance ministry bond yield at 2.6457%
11 20150917 0338 CNH TRACKER-Dim sum bond market seen to get a boost from stable FX
07 20151014 1033 China’s Finance Ministry Plan Yuan Bond Sales in London
12 20160115 Debt Market Industry in Hong Kong
06 20151116 1136 China’s finance ministry to issue 14b yuan bond in Hong Kong
14 20160209 Asia Credit Report, Fourth Quarter 2015
13 20160212 Renminbi Business in Hong Kong
08 20160224 1327 Dim Sum bonds losing shine as China’s onshore yuan bond market reopens
10 20160301 CS and Mayor of Shenzhen co-chair Hong Kong/Shenzhen Co-operation Meeting (with photos)
09 20160302 1432 Dim Sum bonds brace for impact as Beijing opens onshore bond market to global investors

dim sum

05 20150421 0327 UPDATE 1-Jumbo China bond sale in Hong Kong meets strong demand
2016-03-12 07:28 PM
http://www.reuters.com/article/china-bondholders-dimsum-idUSL3N0O71SZ20140521
UPDATE 1-Jumbo China bond sale in Hong Kong meets strong demand
By Michelle Chen
Markets | Wed May 21, 2014 3:27am EDT

  • China finance ministry sells 16 bln yuan dim sum bonds
  • 7 bln yuan of 3-year bonds at 2.53 pct was largest tranche
  • Ample liquidity, low funding costs boost demand

HONG KONG, May 21 China completed the sale of 16 billion yuan ($2.56 billion) in dim sum bonds on Wednesday, drawing strong demand from institutional investors seeking to diversify investment portfolios despite the weakness of the Chinese currency.

China’s economy has shown broad weakness in April and the yuan has wiped out all its gains against the dollar last year, but investor appetite for highly-rated debt remains intact.

Bonds of various tenors were offered, but the largest amount sold was 7 billion yuan of three-year bonds at 2.53 percent, the Ministry of Finance said on its website, in line with expectations and lower than a previous auction last year.

The rest of the sale included 4 billion yuan of five-year bonds at 3.25 percent, 1 billion yuan of both seven-year and 10-year bonds at 3.8 percent and 4 percent, respectively, and 500 million yuan of 15-year and 20-year bonds at 4.29 percent and 4.5 percent.

Another 2 billion yuan was allocated to seven central banks and regional monetary authorities, comprising 1.4 billion yuan of three-year tenor, 400 million five-year tenor and 200 million yuan seven-year tenor bonds.

The coupon rates for central banks were the same as the institutional tranche.

“These are largely within the ranges of expectations,” said Frances Cheung, a senior strategist at Credit Agricole. “We see continued demand for these papers due to needs for investment diversification, including reserves diversification.”

The 14 billion yuan institutional tranche was auctioned via the Hong Kong Monetary Authority’s Central Moneymarkets Unit (CMU), which showed the total order book of the bonds reached 40.9 billion yuan.

Demand for the three-year tenor was especially strong where the application amount was more than three times of the issue size.

The success of the sale was also due to ample liquidity in the offshore market and low funding costs for foreign investors to obtain the Chinese currency via cross currency swaps.

Hong Kong’s yuan deposits rose to 945 billion yuan by the end of March, up 4 percent from a year earlier. Together with the yuan deposits in Taiwan, Singapore, London and South Korea, the overall offshore pool amounted to 1.5 trillion yuan.

The Ministry of Finance (MOF) is the biggest and most prolific player in the primary market of dim sum bonds and its bond sales are a much awaited event among investors as it sets the tone for other issuers.

The MOF will issue a total of 28 billion yuan in offshore yuan bonds this year, the highest level since it first tapped the dim sum market. This year’s sales will make its issuance since 2009 top 108 billion yuan.

Bank of Communications Hong Kong branch is the issuing, lodging and fiscal agent of the bond issue.

($1 = 6.2384 yuan) (Editing by Jacqueline Wong)


02 20150520 1952 China MOF dim sum bond sale sees hot demand
2016-03-12 07:22 PM
http://www.scmp.com/business/money/markets-investing/article/1804689/china-mof-dim-sum-bond-sale-sees-hot-demand
China MOF dim sum bond sale sees hot demand
Jeanny Yu jeanny.yu@scmp.com
PUBLISHED : Wednesday, 20 May, 2015, 7:52pm
UPDATED : Thursday, 21 May, 2015, 8:33am

Hong Kong investors snap up mainland government debt despite lower-than-expected yields amid a limited supply of low-risk yuan assets

Offshore yuan bonds worth 12 billion yuan were offered yesterday, including 5 billion yuan of three-year bonds at 2.8 per cent. Photo: AFP

Demand for Beijing’s latest dim sum bond sale was red-hot yesterday, with most notes sold at much-lower-than-expected yields as investors in Hong Kong snapped up the government debt amid a limited supply of low-risk yuan assets.

Twelve billion yuan (HK$15.2 billion) worth of offshore yuan bonds in six different tenures were offered yesterday, including five billion yuan of three-year bonds at 2.8 per cent, the Hong Kong Monetary Authority said.

The yield was below market players’ expectations of between 2.85 per cent and 2.95 per cent but higher than that of the previous two auctions last year, when investors bought the three-year bonds at 2.74 per cent in November and 2.53 per cent in May.

The rest of the sale included three billion yuan of five-year bonds at 3 per cent, 1.5 billion yuan of seven-year bonds at 3.36 per cent, 1.5 billion yuan of 10-year bonds at 3.39 per cent, 500 million yuan of 15-year bonds at 3.6 per cent and 500 million yuan of 30-year bonds at 4.1 per cent.

The total amount of dim sum bonds issued so far this year is down by about 46 per cent from the same period last year, with offshore investors fretting over rising default risks and a slowing mainland economy, which grew at its weakest pace in seven years in the first quarter of the year.

Analysts said fund managers’ cash levels would be high after months of heavy maturity in dim sum bonds and a sluggish primary market, pushing up demand for the government notes.

The Ministry of Finance has issued 14 billion yuan worth of dim sum bonds so far this year, half of last year’s total, but 13.1 billion yuan will have matured by the end of the year, taking the amount likely to be outstanding by then to 14.9 billion yuan, a five-year low.

“The demand for the notes was so strong,” said Frances Cheung, the Asia ex-Japan head of rates strategy at Societe Generale. “We have seen continued demand for such notes as investors are seeking to diversify their investment portfolios to ensure that they have some yuan asset exposure.”

She said she was most surprised by the low pricing of the five-year notes, the lowest since 2013. In November’s auction, the five-year notes were auctioned at a yield of 3.25 per cent.

“Mid-term notes usually are in relatively less demand,” Cheung said. “However, it turned out that investors were also buying those notes aggressively.”

A further two billion yuan was allocated to central banks and regional monetary authorities at the same yield as the bonds sold to institutional investors yesterday. The HKMA received orders worth 3.66 billion yuan.

The Ministry of Finance is scheduled to issue a further 14 billion yuan of dim sum bonds in the second half of the year, targeting both institutional and retail investors.

This article appeared in the South China Morning Post print edition as Dim sum bond sale sees strong demand


04 20150520 0334 UPDATE 1-China completes sale of 14 bln yuan bonds in Hong Kong
2016-03-12 07:27 PM
http://www.reuters.com/article/china-bonds-dimsum-idUSL3N0Y91PC20150520
UPDATE 1-China completes sale of 14 bln yuan bonds in Hong Kong
By Michelle Chen and Hongmei Zhao
Markets | Wed May 20, 2015 3:34am EDT

May 20 China sold 14 billion yuan ($2.26 billion) of yuan-denominated offshore bonds in Hong Kong on Wednesday, the seventh consecutive year the Ministry of Finance (MOF) has tapped the market as it ramps up efforts to internationalise the currency.

Bonds of various tenors were offered, among which the largest amount sold was 5 billion yuan of three-year bonds at 2.8 percent, two people familiar with the sale told Reuters.

The five-year tranche was priced at 3.0 percent and the seven-year tranche at 3.36 percent.

The longer tenor tranches were priced at 3.39 percent for the 10-year piece, 3.6 percent for 15-year piece and 4.1 percent for 30-year piece.

“The results are in line with our expectation. Investors have gradually come back to the dim sum bond market as the yuan FX rate has stabilised,” said a fund manager in Hong Kong.

Hong Kong’s offshore yuan bond market rallied strongly in the past month, with the high-yield sector taking the lead, thanks to improved risk appetite and the easing of tight liquidity that has lasted for months.

The MOF is the biggest and most prolific player in the primary market of dim sum bonds and its bond sales are a much- awaited event among investors, as it sets benchmarks for other issuers.

The ministry plans to auction 28 billion yuan bonds this year, the same total as last year. The second tranche will be issued in the second half.

The first batch of sales on Wednesday were made to institutional investors, foreign central banks and regional monetary authorities.

($1 = 6.2034 Chinese yuan) (Editing by Richard Borsuk)


03 20150826 1726 China finance ministry to auction 30bn yuan 5-year bonds
2016-03-12 07:26 PM
http://www.brecorder.com/markets/fixed-income/asia/252464-china-finance-ministry-to-auction-30bn-yuan-5-year-bonds.html
China finance ministry to auction 30bn yuan 5-year bonds
Shoaib-ur-Rehman Siddiqui, Wednesday, 26 August 2015 17:26

SHANGHAI: China’s Ministry of Finance said on Wednesday that it will auction 30 billion yuan ($4.7 billion) in five-year government bonds on Sept. 7.

After the auction, the bonds will begin secondary market trading on Sept. 14, it said in a statement published on the ministry’s website.

Copyright Reuters, 2015


01 20150914 0909 China 2-year finance ministry bond yield at 2.6457%
2016-03-12 07:21 PM
http://articles.economictimes.indiatimes.com/2015-09-14/news/66532421_1_yield-26-billion-yuan-interbank-market
China 2-year finance ministry bond yield at 2.6457%
A STAFF REPORTER Sep 14, 2015, 09.09AM IST

SHANGHAI: China’s Ministry of Finance auctioned 26 billion yuan ($4 billion) of two-year bonds in the interbank market on Monday at an average yield of 2.6457 percent, traders said.

The auction yield came in above Friday’s benchmark secondary market yield of 2.6374 percent for two-year government bonds.


11 20150917 0338 CNH TRACKER-Dim sum bond market seen to get a boost from stable FX
2016-03-12 07:56 PM
http://www.reuters.com/article/china-yuan-offshore-idUSL4N11M2OU20150917
CNH TRACKER-Dim sum bond market seen to get a boost from stable FX
Markets | Thu Sep 17, 2015 3:38am EDT

Beijing’s attempts to stabilise the yuan should boost the sluggish offshore yuan bond market, after the damage inflicted by the currency’s weakness in the wake of last month’s devaluation.

The offshore yuan shot higher suddenly last Thursday on suspected intervention by state banks and it has been hovering around 6.4 per dollar. The spread between onshore and offshore spots has narrowed to around 300 pips from more than 1,000 pips.

“Our yuan bond funds will benefit from the appreciation in the short term and investors’ appetite for yuan assets is likely to come back if CNH FX rate stays close to CNY,” said a fund manager in Hong Kong who invests in dim sum bonds.

Investors would prefer to buy yuan bonds issued in the mainland instead of those in Hong Kong as the onshore yuan is stronger than the offshore yuan, but the good thing is that the gap between the two rates has narrowed, the fund manager said.

The primary offshore yuan bond market has lost growth momentum this year since Chinese financial institutions and companies that used to be dominant issuers switched to the onshore market to raise cheaper funds.

The People’s Bank of China’s (PBOC) devaluation of the yuan on Aug. 11 has added to the pressure on dim sum bonds as investors sold yuan assets to avoid further foreign exchange losses.

Dim sum bond issuance in August fell to 7.5 billion yuan($1.18 billion), the lowest monthly volume in two years, according to Thomson Reuters statistics. Issuance in the first eight months declined by 45 percent from a year ago.

The HSBC offshore yuan bond index showed that these bonds’ performance in August fell by 2.6 percent from a month earlier, the biggest monthly drop since June 2013 when index declined by 2.8 percent.

But thanks to the suspected intervention, the secondary dim sum market became more active as new funds were gradually coming in to seek opportunities, said Penny Chen, a fixed-income fund manager at Manulife Asset Management in Taiwan.

“There is a bigger than needed risk premium on offshore yuan bonds that is being attached now in light of the recent market turmoil which offers us opportunities,” said Bryan Collins, who manages $5 billion in assets at Fidelity Worldwide Investment.

Bets on further weakness in China’s yuan fell by more than half in the last two weeks as the central bank continued to intervene to stabilise the currency after its surprise devaluation last month, a Reuters poll showed on Thursday.

Some analysts, however, remain cautious about the yuan’s prospect in the coming year, with some of the most bearish ones, such as Kevin Lai, Daiwa’s Asia ex-Japan chief economist, expecting it to fall to 7.5 per dollar by the end of next year.

WEEK IN REVIEW:

  • Hong Kong’s yuan deposits and certificates of deposits (CDs) is expected to fall in the short term as some investors have converted the yuan to Hong Kong dollar or U.S. dollar, Norman Chan, the chief executive of the Hong Kong Monetary Authority said on Wednesday.
  • China’s top economic planner on Wednesday told Chinese firms with good credit to issue bonds in cheaper offshore markets to support domestic investment and major national projects.
  • China’s central bank and commercial banks sold a net 723.8 billion yuan ($113.69 billion) of foreign exchange in August, by far the largest on record, highlighting how capital outflows intensified in the wake of the yuan’s devaluation last month.
  • China will allow foreign central banks to trade in its spot interbank foreign exchange market and trade currency derivatives such as swaps and forwards, the central bank said on Monday.
  • The People’s Bank of China (PBOC) has increased the quota for net yuan inflows under a cross-border pooling scheme that enables companies to transfer the yuan between their onshore and offshore entities freely, two sources told Reuters.

CHART OF THE WEEK:

Performance of offshore yuan bonds lags peers in the region: link.reuters.com/zaw35t

RECENT STORIES: Hong Kong yuan deposits seen falling despite China FX stabilisation efforts China central bank seen ready to intervene again if offshore pushes yuan too far China’s clamp down on speculators in yuan forwards set to hit importers too

More stories about the CNH market Daily onshore yuan reports Daily China money market reports Offshore yuan rate Onshore yuan rate Offshore yuan dealt Onshore yuan on CFETS THOMSON REUTERS SPEED GUIDES

(Additional reporting by Saikat Chatterjee; Editing by Simon Cameron-Moore)

07 20151014 1033 China’s Finance Ministry Plan Yuan Bond Sales in London
2016-03-12 07:30 PM
http://www.bloomberg.com/news/articles/2015-10-14/china-s-finance-ministry-said-to-plan-yuan-bond-sales-in-london
China’s Finance Ministry Plan Yuan Bond Sales in London
Bloomberg News, October 14, 2015 – 10:33 AM WIB
Updated on October 14, 2015 – 12:31 PM WIB

All previous offshore issuance of the notes was in Hong Kong
Offering to proceed after PBOC sells yuan debt in London

China plans to issue yuan-denominated sovereign bonds in London for the first time as it seeks a greater role for its currency in global trade and finance, according to people familiar with the matter.

The sale would be the first offshore issuance of the notes outside of Hong Kong and is expected to take place after the People’s Bank of China sells one-year bills in the U.K. capital, said the people, who asked not to be named as the proposal has yet to be announced. The central bank’s offering, which is being arranged by Industrial & Commercial Bank of China Ltd. and HSBC Holdings Plc, is due to take place by early November.

“It’s time for China to broaden the sovereign bond market beyond Hong Kong,” said Ngan Kim Man, deputy head of treasury at China Everbright Bank Co.’s Hong Kong branch. “It’s quite a natural move and can bolster yuan usage in Europe. It’s part of the yuan internationalization strategy.”

Asia’s biggest economy is allowing global funds increased access to its domestic capital markets and broadening the range of yuan-denominated investments available offshore as it pushes for the currency to win reserve status at the International Monetary Fund in a November review. The proposed debt sales in London come at a time when yields in the onshore market are declining, with the coupon on 10-year bonds having fallen below 3 percent at an auction for the first time since 2008.

Yuan Hub

Issuing notes in London will help cement the city’s place as the dominant yuan trading hub for Europe as Paris and Frankfurt compete for a share of the market. Outside of China, only Hong Kong and Singapore are bigger clearing centers than the U.K. for yuan transactions, according to the Society for Worldwide Interbank Financial Telecommunications.

The PBOC will sell as much as 5 billion yuan ($788 million) of one-year bills in London within a month, which would be the central bank’s first issuance outside of the domestic market, people familiar with the matter said last week. China Development Bank and China Construction Bank Corp. are among issuers that have already sold yuan-denominated debt in the city.

China Construction Bank, the nation’s second-largest lender, issued 1 billion yuan of two-year bonds in London this week at 4.3 percent, according to data compiled by Bloomberg. Only 1 percent of the debt was sold to investors in Europe, with Asia-based buyers accounting for the other 99 percent. Similar-maturity notes from top-rated Chinese commercial banks yield 3.55 percent in Shanghai, ChinaBond data show.

“It does take time to cultivate a new investor base,” said Ngan of China Everbright. “We should see more high-grade issuers tap the London yuan market so investors in Europe will become more familiar with Chinese names.”

Xi Visit

China’s planned sale of sovereign bonds was earlier reported by the Financial Times and comes before President Xi Jinping pays his first state visit to the U.K. during the Oct. 19-23 period. The Ministry of Finance, which auctioned 10-year bonds with a 2.99 percent coupon in Shanghai on Wednesday, didn’t respond to a faxed request seeking comment on the proposed London sale.

In August, the yuan became the fourth most-used currency for global payments with a 2.79 percent share, surpassing the Japanese yen. The U.K. became the first foreign sovereign issuer of yuan bonds last year and in September said it supported China’s bid to have the currency included in the IMF’s Special Drawing Rights, which currently comprise dollars, euros, yen and British pounds.


12 20160115 Debt Market Industry in Hong Kong
2016-03-12 07:57 PM
http://hong-kong-economy-research.hktdc.com/business-news/article/Hong-Kong-Industry-Profiles/Debt-Market-Industry-in-Hong-Kong/hkip/en/1/1X000000/1X003UPT.htm
Debt Market Industry in Hong Kong
Gary Ng, 15 Jan 2016

Overview

Hong Kong is one of the most liberal debt markets in the world. International investors are free to invest in debt instruments issued in Hong Kong. There are no restrictions on foreign borrowers tapping the domestic debt market to finance their business.

Hong Kong has an active and liquid private-sector bond market. The size of the market, as measured by the outstanding amount of non-public Hong Kong dollar debt securities, was HK$559 billion (US$71.7 billion) as of end-2014, accounting for around 40% of the total outstanding Hong Kong dollar debt instruments.

The Hong Kong government continues to implement the Government Bond (GB) Program to promote the non-bank investor base in Hong Kong. An outstanding amount of HK$98 billion under the GB Program was recorded as of December 2014.

To enhance Hong Kong’s role as an Islamic Finance platform, the Hong Kong government has amended tax laws for preparing an inaugural sukuk issuance under the GB program with the issuance size ranging between US$500 million and US$1 billion.

The Hong Kong government has launched an inflation-linked bond issue programme called iBond, with the latest batch rolled out in August 2015 with an issuance size of HK$10 billion.

In 2014, issuance of RMB bonds in Hong Kong (Dim Sum Bonds) reached RMB197 billion, compared with that of RMB116.6 billion in 2013.

Industry Data

Table: Outstanding Amount of Hong Kong Dollar Debt Instruments

Hong Kong is developing into a multi-currency capital market and a major debt market. After the introduction of a US dollar Clearing System in August 2000, a second foreign currency clearing system Euro Clearing was implemented in April 2003, followed by the implementation of a full-fledged Renminbi RTGS system in June 2007.

Exchange Fund Bills and Notes (EFBNs) and eligible private debts are cleared through the Hong Kong Monetary Authority’s (HKMA) Central Moneymarkets Unit (CMU) to provide computerised clearing and settlement facilities. Hong Kong is among the pioneers in adopting a Real Time Gross Settlement (RTGS) system, which was introduced in December 1996, allowing both real time and end-of-day delivery versus payment service. To facilitate the issuance and trading of Renminbi (RMB) bonds in Hong Kong, the RTGS system and CMU were upgraded to handle the related settlements of RMB funds and trading of RMB bonds respectively in June 2007. In June 2012, HKMA established a CMU Central Bank Placement Coordinating Window, an issuance mechanism to expand the investment base to central banks and monetary authorities.

Most of the private sector bond trading occurs in the OTC market, although many debt instruments are also listed on the Hong Kong Exchange (HKEx). Several private sector financial institution groups have set up electronic bond trading platforms for institutional investors, and individual banks and brokerage houses have been providing on-line bond trading to their retail clients.

Industry Development and Market Outlook

Hong Kong’s debt market is relatively small compared to its banking and equity markets. However, growth of the market has been very rapid and the outstanding amount of Hong Kong dollar debt securities had increased to 63% of GDP in 2014, compared with only 8% of GDP in 1994. Non-public segment of the outstanding amount accounted for some 25% of GDP during the same period.

The Government Bond Programme (GB Programme) was implemented in 2009, with the aim to enlarge the local bond market, allowing the Hong Kong government to issue official bonds up to HK$100 billion, with the HKMA helping to offer the bonds and implement the Programme. The size of the GB Programme was expanded to HK$200 billion in 2013.

In the Budget 2011-12, the government launched a new type of government bond (named iBond) under the GB Programme, which links its return to inflation. The iBond programme only accepts subscription from local residents. The latest batch of iBond was issued in August 2015 with an issuance size of HK$10 billion.

As of December 2014, HK$96.5 billion of bonds were outstanding under the GB Program, made up by HK$30 billion of retail bonds and HK$66.5 billion of institutional bonds.

To enhance Hong Kong’s role as an Islamic Finance platform, the amendment bills of Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) and Trust Law were passed in 2013. Further, the Loans (Amendment) Bill 2014 was passed in March 2014 to allow issuance of sukuk under the Government Bond Programme.

In September 2014, the Hong Kong government issued an inaugural sukuk under the GB programme with an issuance size of US$1 billion. This was the world’s first Islamic bond issued by an AAA-rate government. A series of investor meetings (Roadshows) regarding potential sukuk issuance have been arranged in Asia, the Middle East, Europe and the US starting since September 2014.

RMB bonds issued in Hong Kong

RMB bonds have recently emerged as a new driving force for the development of Hong Kong’s bond market, with a higher diversification in the instruments types issued. Three floating papers were issued in 2013. In January 2013, in addition to the fixed- rate issuance which was dominated in the past. HSBC issued RMB 1billion two- year floating rate RMB bond, marking the first issuance of floating- rate note since 2011. The floating paper was issued with an initial price fixed at the three-month Shanghai Interbank Offered Rate (SHIBOR)-60 basis points.

In November 2013, China Development Bank (CDB) issued RMB1.9 billion worth RMB floating- rate bond. In the same month, L- Bank, a German issuer, launched 250 million of RMB floating- rate bond, first in the world linked to the CNH (Chinese offshore Yuan) Hong Kong Interbank Offered Rate.

In support of the development of Hong Kong as an offshore RMB business centre, as well as opening up a new channel for financial intermediation between Hong Kong and the Mainland, China’s Ministry of Finance (MoF) launched its inaugural sale of sovereign RMB bonds of RMB 6 billion in Hong Kong in October 2009.

After issuing RMB14 billion of sovereign bonds in Hong Kong in May 2015, China’s MOF announced in mid-November 2015 to further issue RMB14 billion in Hong Kong, of which RMB12 billion would be issued to institutional investors, central banks and monetary authorities outside the Chinese mainland through a tendering mechanism of the HKMA, with the remaining RMB2 billion to Hong Kong residents through placing banks and the HKEx.

In 2014, issuance of RMB bonds in Hong Kong (Dim Sum Bonds) from more than 100 issuers reached RMB197 billion, compared with that of RMB116.6 billion in 2013.The outstanding Dim Sum Bonds issued in Hong Kong amounted to RMB381 billion as of end-2014.

The issuer base of Dim Sum Bonds became more diversified. According to Hong Kong Monetary Authority, for Dim Sum Bonds issues up to end-December 2014, mainland authority, banks and enterprises jointly issued 42% of the bonds, banks and enterprises from Hong Kong issued 19% of the bonds, while overseas corporations contributed the remaining share.

In addition, mainland non-finance-related enterprises were allowed to issue RMB bonds in Hong Kong in 2011. After the first issuance of such kind by Baosteel Group Limited in December 2011, the National Development and Reform Commission (NDRC) published a Circular on “the Matters relating to the Issuance of RMB Bonds in Hong Kong by Onshore Non-financial institutions” in May 2012, formalising the approval process for the Mainland non- financial institutions to issue RMB bonds in Hong Kong.


06 20151116 1136 China’s finance ministry to issue 14b yuan bond in Hong Kong
2016-03-12 07:29 PM
http://www.thestar.com.my/business/business-news/2015/11/16/chinas-finance-ministry-to-issue-14-bln-yuan-bond-in-hong-kong/
China’s finance ministry to issue 14b yuan bond in Hong Kong
Monday, 16 November 2015 | MYT 11:36 AM

BEIJING: China’s Ministry of Finance (MOF) said on Monday it would issue 14 billion yuan (US$2.2 billion) in yuan-denominated treasury bonds in Hong Kong from November 23.

The bond issuance will target Hong Kong residents, institutional investors and foreign banks and monetary authorities, the ministry said in a statement on its website.

The first batch of 14 billion yuan worth of yuan-denominated bonds for 2015 was auctioned on May 20, the ministry said.

The MOF has been auctioning bonds denominated in the offshore yuan in Hong Kong since 2009, supporting the development of the offshore yuan market there.- Reuters


14 20160209 Asia Credit Report, Fourth Quarter 2015
2016-03-12 08:48 PM
http://www.sifma.org/research/item.aspx?id=8589958731
Asia Credit Report, Fourth Quarter 2015
February 9, 2016

Asia Credit Report, Fourth Quarter 2015 (PDF)
http://www.sifma.org/WorkArea/DownloadAsset.aspx?id=8589958730

About the Report

Done in partnership with ASIFMA, the Asia Credit Report is a quarterly report on the trends and statistics of the Asian bond market, including both the investment grade and high yield bond market. Additional statistics on the G3 and CNH markets are also included.

For more information on ASIFMA’s efforts in Asian fixed income, please visit ASIFMA.

Summary

Market Overview and Highlights of Asia (ex-Japan, Australia and New Zealand) debt issuance in Fourth Quarter 2015

Total issuance in 4Q’15 came in at USD 29.9 billion (bn) as of December 31, up 13.1% quarter-over-quarter (qoq) from 3Q’15 (USD 26.4bn) but down 37.5% year-over-year (yoy), inclusive of high grade (HG), high yield (HY), and unrated deals. For the full year, issuance was USD 169.2 billion, comprised of USD 134.3bn HG issuance, USD 16.0bn HY issuance, and USD 19.7bn unrated issuance, well below the high of USD 201.3 billion reached in 2014.

Key trends in Asia (ex-Japan, Australia and New Zealand) G3 & LCY bond issuance

For the fourth quarter 2015, total G3 issuance stood at USD 29.9bn, up 13.1% qoq but down 37.5% yoy. China remains the largest issuing country in the fouth quarter, accounting for a total of USD 15.4bn, or just over half (51.4%) of G3 issuance in 4Q’15; USD 10.6bn and USD 850mn in HG and HY deals, respectively, were priced from China alone. South Korea continues trail behind as the second largest issuing nation, with USD 4.9bn issued in 4Q’15, followed by Indonesia with USD 3.6bn in issuance.

Overall G3 debt outstanding in the region stood at USD 779.76bn, a growth of 2.2% qoq.

Total Issuance and Outstanding for Asia inclusive of Japan, Australia, and New Zealand

Total G3 issuance in Asia (including Japan, Australia and New Zealand) stood at USD 94.6bn in the fourth quarter of 2015, a growth of 2.6% qoq but a decline of 12.7% yoy. In 4Q’15, total HG G3 issuance in Asia was USD 58.2bn, a growth of 5.3% qoq but a decline of 19.8% yoy; HY issuance was USD 3.8bn, a decline of 36.4% qoq and 44.0% yoy; and unrated issuance was USD 32.6bn, a decline of 6.0% qoq but an increase of 12.5% yoy. For the full year, total G3 issuance reached USD 440.8bn, falling just short of 2014 volumes of USD 487.3 billion, comprised of USD 291.2bn HG issuance, USD 22.2bn HY issuance, and USD 133.9bn unrated issuance. Outstanding G3 debt, including developed market Asia, stood at USD 11.86tn at the end of fourth quarter 2015, a decline of 0.5% qoq, with declines in unrated debt (USD 2.2tn, a 3.2% decline), but growth in HG debt (USD 9.4tn, a 0.2% growth) and HY debt (USD 214.5bn, a 1.5% growth).

Domestic CNY Issuance

Total domestic CNY issuance stood at USD 187.6bn in the fourth quarter of 2015, up 19.9% from third quarter volume (USD 156.5bn) and 70.1% yoy (USD 110.3bn). Fourth quarter volumes more than made up for the relatively low levels of issuance in the first three quarters; for the full year, domestic CNY issuance reached USD 558.4bn, well above 2014 volumes (USD 498.7bn) but half that of prior years.

Outstanding domestic CNY debt stood at USD 7.2tn at the end of fourth quarter 2015, with sovereigns leading totals (USD 4.05tn), followed by financials (USD 1.58tn) and industrials (USD 593.22bn).

Offshore Renminbi (CNH) Issuance

The pace of issuance picked up slightly on both a qoq and a yoy basis in the fourth quarter. For the fourth quarter of 2015, an equivalent of USD 8.6bn in CNH bonds were issued, an increase of 119.2% qoq but a decline of 14.7% yoy. For the full year, CNH issuance was USD 29.4bn, a decline of 30.3% from 2014 totals. (USD 42.1bn).

The total of dim sum bonds outstanding stands at USD 108.8bn, an increase of 11.7% qoq. Continued erosion of the CNH deposit base in Hong Kong following steep falls in the offshore Chinese currency, which at one point in time traded considerably weaker than its onshore counterpart, contributed to negative investor perceptions towards the CNH and the dim sum bond market overall.
Credits

ASIFMA

Executive Director, Fixed Income: Vijay Chander

SIFMA Research

Managing Director, Head of Research: Kyle Brandon
AVP: Sharon Sung

13 20160212 Renminbi Business in Hong Kong
2016-03-12 08:09 PM
http://www.hkma.gov.hk/eng/key-functions/international-financial-centre/renminbi-business-hong-kong.shtml
Renminbi Business in Hong Kong
12 February 2016

Hong Kong was the first offshore market to launch renminbi business back in 2004. Along the expanding use of renminbi in global trade and investment activities over the years, Hong Kong has developed into the global offshore renminbi business hub with the deepest and most liquid renminbi market outside Mainland China. Banks and other financial institutions in Hong Kong offer a full range of renminbi services to meet the needs of different businesses and investors. With its strengths as an international financial centre and a unique edge in its close links with Mainland China, Hong Kong is now the global hub for renminbi trade and banking services, financing, asset management, as well as clearing and settlement. The highly efficient and robust market infrastructure in Hong Kong, including the Renminbi Real Time Gross Settlement system, is playing a critical role in facilitating market participants from all over the world to handle renminbi transactions both with Mainland China and among the offshore markets.

Hong Kong : The Global Offshore Renminbi Business Hub (January 2016) (PDF File, 8.46MB) http://www.hkma.gov.hk/media/eng/doc/key-functions/monetary-stability/rmb-business-in-hong-kong/hkma-rmb-booklet.pdf

Accessible Version (PDF File, 193KB) http://www.hkma.gov.hk/media/eng/doc/key-functions/monetary-stability/rmb-business-in-hong-kong/hkma-rmb-booklet_accessible.pdf


08 20160224 1327 Dim Sum bonds losing shine as China’s onshore yuan bond market reopens
2016-03-12 07:33 PM
http://www.scmp.com/business/money/investment-products/article/1916146/dim-sum-bonds-losing-shine-chinas-onshore-yuan
Dim Sum bonds losing shine as China’s onshore yuan bond market reopens
Summer Zhen summer.zhen@scmp.com
PUBLISHED : Wednesday, 24 February, 2016, 1:27pm
UPDATED : Wednesday, 24 February, 2016, 7:34pm

Mainland property developers are flocking back to domestic bond markets now that Beijing has reopened the fund raising channel, reversing a ban placed on developers in 2009. Photo: Reuters

China’s offshore renminbi bond market, also known as dim sum bonds, are losing their appeal to mainland developers who are looking instead to the onshore market for their fundraising needs.

So far this year, there’s been zero dim sum bond issuance by mainland developers.

What had once been a hot market began to cool sharply last year, when 6.6 billion yuan was raised, down from 18 billion yuan in 2014, according to data provider Dealogic.

Mainland real estate firms had been the backbone of the dim sum bond issuance, accounting for 10 per cent of all offshore issuance last year.

Their waning interest in dim sum bonds will have repercussions for China’s currency.

The offshore yuan bonds market, opened in Hong Kong in 2007, is a key part of China’s ambitions to elevate the yuan into an international currency for trade and finance.

The market grew rapidly from 2007 to 2014, when the yuan was on a appreciating trend versus the US dollar. However the golden years appear to have to drawn to close, with the fatal blow being China’s decision to reopen the onshore bond market to mainland developers in 2014, reversing an edict that put onshore bonds off limits to land companies in 2009, as part of efforts to cool the overheated housing market.

Chinese officials are now hoping to boost property investment by reopening domestic credit channels to developers.

Since the onshore yuan is much bigger in size than the dim sum bonds, and developers can receive more favourable credit ratings from domestic rating agencies, the cost of issuing debt in Shanghai is on average 4 to 5 percentage points lower than Hong Kong.

“Both developers and investors are staying away from dim sum bonds,” said Tony Chen, a mainland property credit analyst at Nomura International (Hong Kong).

“The cost for developers to raise onshore yuan is much cheaper. Dim sum bond are not as attractive as before,” he said.

He added that lending conditions in China are expected to continue to ease as Beijing looks to the property sector as an engine to help drive the economy.

Mainland Chinese developers have been struggling to cut financing costs as land prices have surged in recent years. One way to achieve this is through cheap domestic funding.

Jefferies estimates the mainland property sector’s average borrowing costs last year declined 1 to 2 percentage points by shifting focus to the domestic bond market.

The central bank’s decision to devalue yuan against the US dollar by 2 per cent last August was the trigger that sparked an exodus from the offshore market, analysts said.

“Investors are requiring higher yield to hedge currency risk now, usually a 4 percentage points premium on average,” Chen said.

Invester interest in yuan bonds in Hong Kong had continued to diminish amid expectations of further declines in the yuan’s value against the US dollar. The offshore yuan has depreciated against the US dollar by more than 5 per cent last year. Many expect it will drop a further 5 to 10 per cent this year.

“This year would be a tougher year for the dim sum bond market,” Chen said.

Most Hong Kong-listed mainland developers, including big names like China Overseas Land & Investment have said they plan to raise funds through domestic financing channels this year.

Hoffman Tsui, executive director of KWG property, said his company is has backed away from the offshore bond market in Hong Kong. “It’s too expensive, the rate is about 8 per cent,” he said.

The Guangdong developer issued a domestic bond at the end of last year at an annual yield of 4.94 per cent.

While the dim sum bond market is being marginalised, panda bonds, which are also yuan-denominated, are gaining prominence. Panda bonds can be issued by non-Chinese entities and sold in China’s onshore bond market.

Panda bonds are almost as cheap, or sometimes even cheaper than comparable domestic financing.

Country Garden, one of China’s largest developers, sold 1 billion yuan of panda bonds at 4.99 per cent in late December.

The company has received regulatory approval to be among the first Chinese developers to issue a total of 20 billion yuan in panda bonds.

Panda bonds emerge as Beijing steps up efforts to promote the global use of yuan and as developers look to diversify their funding channels and lower funding costs.

Though still at an early stage, many developers, which operate onshore, but are incorporated offshore, have shown interest in the bonds.

KWG’s vice president of finance department Roger Law said the company was considering panda bonds for its fund raising needs.

“The scale of panda bond financing could be larger as it is issued by a parent company registered overseas,” Law said.


10 20160301 CS and Mayor of Shenzhen co-chair Hong Kong/Shenzhen Co-operation Meeting (with photos)
2016-03-12 07:54 PM
http://www.cmab.gov.hk/en/press/press_3735.htm
CS and Mayor of Shenzhen co-chair Hong Kong/Shenzhen Co-operation Meeting (with photos)
Ends/Monday, February 29, 2016 HKT 20:03
1 March 2016

The Chief Secretary for Administration, Mrs Carrie Lam, and the Mayor of the Shenzhen Municipal Government, Mr Xu Qin, co-chaired the Hong Kong/Shenzhen Co-operation Meeting in Hong Kong today (February 29). Relevant officials of the Hong Kong Special Administrative Region (HKSAR) and the Shenzhen Municipal Government attended the meeting.

Mrs Lam said, “Over the past year, with the concerted efforts of the Hong Kong and Shenzhen governments, good progress has been made on various areas of co-operation. 2016 marks the beginning of the implementation of the National 13th Five-Year Plan. The Proposal on Formulating the 13th Five-Year Plan promulgated by the Central Authorities states clearly that the Mainland will step up efforts to further open up its market to Hong Kong and Macao, and enhance co-operation and exchanges between the Mainland and Hong Kong/Macao in areas including social policies, livelihood issues, culture, education and environmental protection, and speed-up of the construction of various Guangdong-Hong Kong-Macao co-operation platforms including Qianhai. I hope that against this important background, the two sides will deepen co-operation in various areas under the principles of complementarity and mutual benefits in the coming year to bring benefits to the people in both Hong Kong and Shenzhen.”

In the meeting, both sides reviewed the achievements made in the past year and set out the direction for co-operation in key areas including innovation and technology, creative industries, financial services, professional services and youth co-operation in the coming year. The progress of co-operation as well as the direction for future co-operation in individual areas are outlined below.

Innovation and Technology

In 2015, the HKSAR Government formally established the Innovation and Technology Bureau to co-ordinate, support and complement the development of Hong Kong’s innovation and technology industry. Since the Karolinska Institutet of Sweden decided to establish its first overseas research facility in Hong Kong, the Government, together with the Municipal Government of Shenzhen and Karolinska Institutet, has already commenced preparation for the establishment of a tripartite task force to explore concrete co-operation projects, so as to make full use of the strengths of Hong Kong and Sweden on regenerative medicine research, as well as the strong industrialisation capability of Shenzhen. It is hoped that the task force can open up a new mode of co-operation between the two places.

Exchanges between innovation and technology professionals of the two places have become increasingly frequent. The Hong Kong Information Technology Joint Council and the Shenzhen Computer User Association signed the “Agreement on Exchange, Co-operation and Mutual Qualification Recognition of Shenzhen Hong-Kong ICT Talents” in March last year, and introduced the “Shenzhen/Hong Kong Chief Information Officer (CIO) Reciprocal Recognition Scheme” under the Agreement at the end of last year. Results of the Reciprocal Recognition will be announced in the first half of this year.

In the 2016 Policy Address, the Chief Executive announced that $2 billion would be set aside for setting up an Innovation and Technology Venture Fund for co-investing with private venture capital funds on a matching basis. The HKSAR Government believes that the measure can attract more venture capital funds, including capital from Shenzhen, to establish a foothold in Hong Kong and invest in local innovation and technology start-ups.

Creative Industries

Shenzhen and Hong Kong have organised the Bi-City Biennale of Urbanism\Architecture at regular intervals while the 2nd HK-SZ Design Biennale will be staged in Hong Kong in September this year. The Commerce and Economic Development Bureau and the Shenzhen Municipal People’s Government on Promoting Co-operation in Creative Industries have agreed to, on the basis of the existing co-operation foundation, further deepen exchanges and collaboration of the two places in creative industries. In this regard, there will be strengthened co-operation of the two places in organising large-scale creative exchange programmes, and discussion on strengthening talent nurturing and exchange. Both sides have also agreed to explore the setting up of an exchange and collaboration platform in Qianhai, Shenzhen, with a view to furthering the co-operation of both cities in domains of creative industries such as design and architecture. At the end of the meeting, both sides signed the “Agreement between the Hong Kong Special Administrative Region Government and the Shenzhen Municipal People’s Government on Promoting Co-operation in Creative Industries”. Both sides will have further discussion in the coming year on taking forward the Agreement.

Financial Services

The cross-boundary Renminbi (RMB) lending between Shenzhen and Hong Kong continued to grow in the past year. The latest figures indicate that cross-boundary RMB loans registered in Qianhai have reached RMB100 billion. Shenzhen Qianhai Financial Holdings Co Ltd, a company wholly owned by the Qianhai Authority, issued a “dim sum” bond of RMB1 billion in Hong Kong in April 2015, and entered into an agreement with Hang Seng Bank and HSBC in July and November 2015 respectively with a view to setting up in Qianhai the first joint venture assets management company in the Mainland under Supplement X of CEPA. Both joint venture companies are held mainly by Hong Kong-funded financial institutions.

To further deepen the co-operation of the securities markets in Shenzhen and Hong Kong, the HKSAR Government has discussed with relevant authorities of the Central Government the launch of the Shenzhen-Hong Kong Stock Connect, with a view to moving towards fuller mutual access of capital markets of the two places.

Looking forward, the HKSAR Government will continue to strengthen Hong Kong’s offshore RMB business. Also, to attract more multinational and Mainland enterprises to establish corporate treasury centres in Hong Kong, the Government has introduced a bill into the Legislative Council to allow, under specified conditions, interest deductions under profits tax for intra-group financing business of corporations and reduce profits tax of qualifying corporate treasury centres by 50 per cent.

Professional Services

On Hong Kong-Mainland law firms operating in the form of partnership association, as at January this year, among the nine law firms operating in the form of partnership association approved in the three pilot areas, six were in Qianhai. The Agreement on Trade in Services signed in November last year further extends the pilot areas of this policy, among which, the Qianhai pilot will be expanded to cover the whole Shenzhen area starting from June 1, 2016, to allow law firms from both sides to provide readily one-stop cross-boundary legal services to their customers, through the form of partnership association.

Hong Kong’s Department of Health signed a service agreement with the University of Hong Kong-Shenzhen Hospital in October last year to jointly launch a pilot scheme to allow eligible Hong Kong elderly persons to use the Elderly Health Care Voucher (HCV) to settle the fees of primary care services at the hospital. The HKSAR Government will closely monitor the operation of the scheme, and study and consider to further expand the scope of the use of the HCV on the Mainland with reference to the experience gained.

In respect of education, the number of Hong Kong primary and secondary schools that have formed sister schools with their counterparts in the Mainland is expected to progressively increase to about 600 in the coming three years, among which the number of Shenzhen-Hong Kong sister school pairs is expected to increase to around 190. On the other hand, the number of minban schools offering the Hong Kong curriculum to Hong Kong students in Shenzhen has increased from nine in the 2014/15 school year to 11 in the 2015/16 school year, including two schools for Hong Kong children.

With the support and concerted effort of the Guangdong Provincial Government and the Shenzhen Municipal Government, the special quota for cross-boundary school coaches has been increased to 220 in the 2015/16 school year, representing a 30 per cent increase over last year. This facilitates the immigration clearance of cross-boundary students. To further enhance Hong Kong students’ understanding of the Mainland, the quotas for students subsidised to join the Mainland exchange programmes to Guangdong will be increased from around 43 000 in the 2014/15 school year to more than 51 000 in the 2015/16 school year, with that to Shenzhen increased to about 7 100 accordingly.

Youth Co-operation

On youth co-operation, the Qianhai Shenzhen-Hong Kong Youth Innovation and Entrepreneur Hub commenced operation in end-2014 and has introduced 52 Hong Kong entrepreneur teams up to now, amounting to about half of the total teams introduced to the Hub. The Shenzhen Municipal Government also provided 300 internship placements and 1 100 exchange opportunities for Hong Kong youths last year. The Home Affairs Bureau is discussing with relevant non-government organisations and, through the Hong Kong and Macao Affairs Office of the People’s Government of Guangdong Province, the corresponding offices in Shenzhen about the youth internship arrangements in 2016.

In order to encourage Hong Kong youth development activities and assist young people in starting their own business, the HKSAR will set up a $300 million Youth Development Fund. The fund will provide financial assistance to young people through non-government organisations to start their business. The fund can also be used in business outside Hong Kong (including Shenzhen).

Other Co-operation Areas

In addition to the above, the two sides have also made steady progress in co-operation in areas such as environmental protection, infrastructure construction, customs clearance and livelihood issues.

Co-operation in Qianhai Development

In the past year, the Shenzhen Municipal Government and the Qianhai Authority have put forward many initiatives that are beneficial to Hong Kong enterprises, for example the “Ten Thousand, Thousand, Hundred and Ten” development target focusing on Hong Kong people and enterprises stipulated in the “Work Plan for the Construction of the Shenzhen Qianhai Shekou Area”. The Proposal on Formulating the 13th Five-Year Plan also requested the speeding up of the construction of various Guangdong-Hong Kong-Macao co-operation platforms including Qianhai. In the coming year, the HKSAR Government will enhance the communication with Shenzhen, Qianhai Shekou Area and the Qianhai Authority, to push forward the realisation of the “Ten Thousand, Thousand, Hundred and Ten” development target stipulated in the Work Plan for the construction of the Shenzhen Qianhai Shekou Area, with a view to providing better and greater opportunities for Hong Kong people and enterprises.

Among them, in the construction and related engineering sector, many Hong Kong companies have already formed joint ventures with their Mainland counterparts to participate in construction projects and provide estate management services in the Qianhai Shenzhen-Hong Kong Modern Service Industry Co-operation Zone. To further assist Hong Kong companies and professionals entering the Qianhai construction market, the Development Bureau and the Qianhai Authority have collaborated and formulated the implementation methodology of the liberalisation measures for Hong Kong based on the mutual understanding set out in their Co-operation Agreement signed in September 2013, including compiling a Hong Kong organisation list and implementing a registration and documentation system for Hong Kong professionals. This would allow Hong Kong companies and professionals to provide professional services to development projects wholly or majorly funded by Hong Kong businesses in Qianhai. After the meeting today, both sides signed and promulgated the co-operation arrangement for expanding the service areas for Hong Kong engineering and construction sectors.

In addition, the Qianhai Authority is discussing with a Hong Kong conglomerate to use its development project in Qianhai as a pilot project to introduce and incorporate elements of Hong Kong project management systems in each stage of the project, including engaging Hong Kong professionals and companies concerned for direct services.

Looking ahead, both sides will strive for the Qianhai Authority to implement as soon as possible the listing of Hong Kong construction companies and registration and documentation systems for Hong Kong professionals of the construction sector based on the “Co-operation Arrangement for Trial Implementation of Hong Kong Construction Model in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen”, and expedite the implementation of the Hong Kong construction model for the pilot project. Qianhai may also consider identifying more pilot projects with a view to further opening up the construction market and strengthening the co-operation in professional services of the two sides. The HKSAR Government hopes that similar liberalisation measures can be extended to other Mainland areas for the Hong Kong sector.

Co-operation Agreement Signing Ceremony

Three co-operation agreements were signed between the two sides after the meeting, namely:
(1) “Co-operation Arrangement for Trial Implementation of Hong Kong Construction Model in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen”;
(2) “Agreement between the Hong Kong Special Administrative Region Government and the Shenzhen Municipal People’s Government on Promoting Co-operation in Creative Industries”; and
(3) “Co-operation Arrangement between the Agriculture, Fisheries and Conservation Department of Hong Kong Special Administrative Region Government and Shenzhen Entry-exit Inspection and Quarantine Bureau on Aquatic Animal Disease Laboratory Diagnosis”.

Officials accompanying the Chief Secretary for Administration in attending the meeting included the Secretary for Constitutional and Mainland Affairs, Mr Raymond Tam; the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung; the Secretary for Education, Mr Eddie Ng Hak-kim; the Secretary for Food and Health, Dr Ko Wing-man; the Secretary for Development, Mr Paul Chan; the Secretary for Innovation and Technology, Mr Nicholas W Yang; the Permanent Secretary for Constitutional and Mainland Affairs, Ms Chang King-yiu; the Permanent Secretary for Development (Works), Mr Hon Chi-keung; the Permanent Secretary for Development (Planning and Lands), Mr Michael Wong; and the Under Secretary for Commerce and Economic Development, Mr Godfrey Leung.

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The Chief Secretary for Administration, Mrs Carrie Lam (third right), and the Mayor of Shenzhen, Mr Xu Qin (third left), co-chair the Hong Kong/Shenzhen Co-operation Meeting at the Conference Hall of the Central Government Offices at Tamar this morning (February 29).

The Chief Secretary for Administration, Mrs Carrie Lam (third right), and the Mayor of Shenzhen, Mr Xu Qin (third left), co-chair the Hong Kong/Shenzhen Co-operation Meeting at the Conference Hall of the Central Government Offices at Tamar this morning (February 29).

Mrs Lam (right) and Mr Xu (left) shake hands before the meeting.

Mrs Lam (right) and Mr Xu (left) shake hands before the meeting.

Mrs Lam (back row, sixth left) and Mr Xu (back row, fifth left) witness the signing of the “Co-operation Arrangement for Trial Implementation of Hong Kong Construction Model in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen” by the Permanent Secretary for Development (Works), Mr Hon Chi-keung (front row, centre); the Director-General of the Housing and Construction Bureau of Shenzhen Municipality, Mr Yang Shengjun (front row, first right); and the Director-General of the Management Authority of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen, Dr Du Peng (front row, first left).

Mrs Lam (back row, sixth left) and Mr Xu (back row, fifth left) witness the signing of the “Co-operation Arrangement for Trial Implementation of Hong Kong Construction Model in Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen” by the Permanent Secretary for Development (Works), Mr Hon Chi-keung (front row, centre); the Director-General of the Housing and Construction Bureau of Shenzhen Municipality, Mr Yang Shengjun (front row, first right); and the Director-General of the Management Authority of the Qianhai Shenzhen-Hong Kong Modern Service Industry Cooperation Zone of Shenzhen, Dr Du Peng (front row, first left).

Mrs Lam (back row, sixth left) and Mr Xu (back row, fifth left) witness the signing of co-operation agreements between Hong Kong and Shenzhen, namely the “Agreement between the Hong Kong Special Administrative Region Government and the Shenzhen Municipal People’s Government on Promoting Co-operation in Creative Industries” signed by the Under Secretary for Commerce and Economic Development, Mr Godfrey Leung (front row, second left), and the Director of the Shenzhen Municipal People’s Government on Promoting Co-operation in Creative Industries, Mr Han Wangxi (front row, first left), and the “Co-operation Arrangement between the Agriculture, Fisheries and Conservation Department of Hong Kong Special Administrative Region Government and Shenzhen Entry-Exit Inspection and Quarantine Bureau on Aquatic Animal Disease Laboratory Diagnosis” signed by the Director of Agriculture, Fisheries and Conservation, Dr Leung Siu-fai (front row, first right), and the Director-General of the Shenzhen Entry-Exit Inspection and Quarantine Bureau, Mr Zhao Zhenshuan (front row, second right).

Mrs Lam (back row, sixth left) and Mr Xu (back row, fifth left) witness the signing of co-operation agreements between Hong Kong and Shenzhen, namely the “Agreement between the Hong Kong Special Administrative Region Government and the Shenzhen Municipal People’s Government on Promoting Co-operation in Creative Industries” signed by the Under Secretary for Commerce and Economic Development, Mr Godfrey Leung (front row, second left), and the Director of the Shenzhen Municipal People’s Government on Promoting Co-operation in Creative Industries, Mr Han Wangxi (front row, first left), and the “Co-operation Arrangement between the Agriculture, Fisheries and Conservation Department of Hong Kong Special Administrative Region Government and Shenzhen Entry-Exit Inspection and Quarantine Bureau on Aquatic Animal Disease Laboratory Diagnosis” signed by the Director of Agriculture, Fisheries and Conservation, Dr Leung Siu-fai (front row, first right), and the Director-General of the Shenzhen Entry-Exit Inspection and Quarantine Bureau, Mr Zhao Zhenshuan (front row, second right).

The Chief Secretary for Administration, Mrs Carrie Lam (right), and the Mayor of Shenzhen, Mr Xu Qin, meet the media after the Hong Kong/Shenzhen Co-operation Meeting in Central Government Offices, Tamar, today (February 29).

The Chief Secretary for Administration, Mrs Carrie Lam (right), and the Mayor of Shenzhen, Mr Xu Qin, meet the media after the Hong Kong/Shenzhen Co-operation Meeting in Central Government Offices, Tamar, today (February 29).


09 20160302 1432 Dim Sum bonds brace for impact as Beijing opens onshore bond market to global investors
2016-03-12 07:34 PM
http://www.scmp.com/business/companies/article/1919663/dim-sum-bonds-brace-impact-beijing-opens-onshore-bond-market
Dim Sum bonds brace for impact as Beijing opens onshore bond market to global investors
Enoch Yiu enoch.yiu@scmp.com
PUBLISHED : Wednesday, 02 March, 2016, 2:32pm
UPDATED : Wednesday, 02 March, 2016, 4:23pm

A Chinese woman speaks on her phone near a display highlighting the new Chinese bank notes at a bank in Beijing, Photo: AP

Beijing’s opening up of the mainland onshore bond market for foreign investors is set to seriously hit the already weak dim sum bond market.

The People’s Bank of China last week announced it would allow foreign investors to invest in its onshore inter bond market which has been seen as a major liberalisation of the mainland market.

These investors are to include banks, insurers, securities firms, asset managers, pension funds and charitable funds without quota restrictions. The details on how it would work, such as the minimum holding period, are still to be announced.

At present, only investment firms that have the Qualified Foreign Institutional Investors (QFII) quota are allowed to invest in the onshore bond market. Retail or institutional investors who do not have a quota are left with few alternatives apart from the dim sum bond market, which are yuan bonds issued in Hong Kong and other markets.

“We think it may be a challenging period for the growth of dim sum bonds if investors get easy access to onshore China bonds,” said Binay Chandgothia, portfolio manager for multi-asset advisors of investment firm Principal Global Investors. [International Monetary Fund Managing Director Christine Lagarde attends a session during the G20 finance ministers and central bank governors meeting in Shanghai on February 27. Photo: Reuters] International Monetary Fund Managing Director Christine Lagarde attends a session during the G20 finance ministers and central bank governors meeting in Shanghai on February 27. Photo: Reuters

He said the move is a natural extension of China’s capital market liberalisation plans after the yuan, also called as renminbi, will be added into the International Monetary Fund’s Special Drawing Right basket from October this year alongside with US dollar, euro, yen and pound.

The SDR basket is tracked by many central banks and big fund houses. These investors would would need to purchase yuan assets and is believed to be a reason behind the latest PBOC move towards liberalisation. However, it appears clear that the new channels for onshore bonds will negatively impact demand for dim sum bonds.

The dim sum bonds issuance has declined substantially since last year due to the devaluation of the yuan. The value of the currency dropped 5.6 per cent against the US dollar last year after a 2.64 per cent drop in 2014. Dim sum bonds were highly sought after when the yuan appreciated against the US dollar from 2007 to 2013.

According to Thomson Reuters data, in the first two months of this year, there were only 12 dim sum bonds issued for a total of 2.28 billion yuan (HK$2.7 billion), representing a drop of 93 per cent from the same period of time last year. Total dim sum bond issuance last year tallied 167.46 billion yuan, reflecting a drop of 50.98 per cent from the 341.67 billion yuan raised in 2014.

Keith Pogson, a senior partner of accounting firm EY, said from the issuers’ point of view, the dim sum bond markets also faces competition of panda bonds, which are also yuan-denominated bonds. The mainland allows non-Chinese entities to issue these debt instruments in China’s onshore bond market.

Pogson said the competition between dim sum bonds and panda bonds will depend on whether the two markets end up having different users.

“Whilst we still have at least a technical difference between offshore yuan and onshore yuan, there will be different pools of capital and investors who will be looking at these different product,” he said.

“There may also be different interest rates, with the onshore rates being subject to the long term views and liquidity in the mainland banking system.”

Pogson however said panda bonds require companies to follow international accounting rules which would make it much more expensive and difficult for companies which are using the US GAAP filing companies. “These players may find it easier to access the dim sum bond market as an ongoing proxy,” he said.

Tim Lo, managing director of French private bank CIC Investor Services, said while the PBOC eased the conditions for the foreign investors to access in the onshore yuan bond market, the details and other conditions have not yet been made clear. He believes the amount for each foreign investors to invest may still be minimal.

“We should anticipate the co-existence of the onshore bond market and offshore dim sum bond market for a long while,” Lo said.

Andrew Fung, executive director of Hang Seng Bank, said only certain category of institutional investors are given access to the domestic bond market at this stage in a bid to ensure the yuan can perform the function of a reserve currency after entering IMF SDR basket.

“While the domestic bond market offer better liquidity and variety in Chinese issuers, I believe Dim Sum bonds can exist on specific features such as jurisdiction, common law base, periodical interest differential, and difference of issuer names, ” he added.


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