Bank of China (BOC), the mainland's second-largest lender, said
yesterday that it plans to issue up to 3 billion yuan of bonds in
Hong Kong.
The bank will be among the first batch of mainland banks to
issue yuan-denominated bonds in Hong Kong, after the central
government gave mainland financial institutions the green light in
January.
"It's a milestone," said Ricky Cheung, vice-president of
Enlighten Securities and Futures. "The yuan bond issue will mark
another opening up in the yuan business in Hong Kong."
He added: "More State-owned lenders will come out to issue
yuan-denominated debts."
Late last month, China Construction Bank (CCB) said it would
issue 5 billion yuan worth of subordinated bonds in Hong Kong, out
of a possible issue of up to 40 billion yuan.
CCB, however, gave no timetable and said the bond issue plan is
pending shareholder and regulatory approval.
Market sources said the Industrial and Commercial Bank of China,
the Export-Import Bank of China and China Development Bank are
considering selling yuan-denominated bonds in Hong Kong.
Market analysts expect the first yuan bond sale would take place
in the third quarter.
"It's a nice investment as you get the pick-up on the currency
appreciation," said Wu Yonggang, an analyst at Guotai Jun'an
Securities.
"It will spur the development of the yuan bond market and expand
the scope of yuan-denominated financial services in Hong Kong," he
said.
The central government and Hong Kong officials had expected the
deregulation to reinforce Hong Kong's standing as a financial
center and to force international levels of transparency on
mainland bond sellers.
For mainland banks, selling yuan-denominated bonds in Hong Kong
offers them a diversified fund-raising channel apart from listing
and retail banking, Wu said.
Casor Pang, a strategist with Sung Hung Kai Financial Group,
said the move would help ease the excessive liquidity on the
mainland.
"It seems the central government is eager to cope with liquidity
issue. And we expect more State-owned lenders to follow suit," he
said.
But due to a small amount of yuan-denominated deposits in Hong
Kong banks, there may not be much incentive for domestic lenders,
some analysts said.
Official statistics show there were about 23 billion yuan
renminbi deposits by the end of last year.
BOC's proposed bond sale is subject to shareholder approval at
the bank's annual general meeting on June 14, the bank said in a
statement to the Shanghai Stock Exchange.
The bonds will have a maturity of up to three years, the bank
said. The interest rate will be determined by the level of the
renminbi deposit rate on the mainland and Hong Kong, as well as the
level of bond yield in relevant bond markets.
(China Daily May 29, 2007)