China 20bn RMB Treasury Bond to be issued in Hong Kong

About China government to issue 20 Billion RMB Treasury Bond in Hong Kong tomorrow:

Background:

Source:

China is to issue yuan-denominated treasury bonds worth 20 billion yuan (about 3.11 billion U.S. dollars) in Hong Kong on Wednesday, a move to promote Hong Kong as the country’s offshore RMB center, according to China’s Ministry of Finance.

Of this, 15 billion yuan with maturity terms of three, five, seven and ten years will be offered to institutional investors and the reminder with a maturity term of two years will be available to individual buyers, the ministry said in a statement on its website.

The Ministry of Finance issued six billion yuan and eight billion yuan of RMB bonds in Hong Kong in 2009 and 2010.

Li Yong, Chinese Deputy Minister of Finance, said that one of the salient features of this year’s issue of bonds is the huge amount, which is 20 billion yuan. This shows the determination of the central government to support the government of Hong Kong SAR and its social and economic development.

“I feel that, first, the policies of the central government are specific, that is, to support the ‘one country, two systems’ policy, promote economic prosperity and maintain Hong Kong’s status as an international financial center. Second, beyond all doubt, RMB has won the confidence on the overseas market, hence its increasingly strong attractiveness,” said Li Yong.

Industry insiders said that at a time when the American debt crisis is not eased and the European debt crisis is spreading to Italy and Spain and has led to big fluctuation of the global markets, Renminbi treasury bonds entail little default risks and Renminbi is facing the pressure of appreciation in its exchange rate to the dollar and Hong Kong dollar. It is believed that the Renminbi treasury bonds are expected to be heatedly hunted after on the market.

Li Yong said: “China is implementing a pro-active fiscal policy, and up to now the country has maintained its strong debt serving ability. The most fundamental of all is China’s financial conditions are relatively robust, leaving much room for issuing RMB bonds.”

Source:

As for the issuance for the institutional investors, the Hong Kong Branch of Bank of Communications Co., Ltd. will take charge of the issuance and act as the agent to carry out the biding.

In terms of the issuance for the individual investors, Bank of China (Hong Kong) Limited and the Hong Kong and Shanghai Banking Co., Ltd. will act as the joint coordinators. And BOC Hong Kong Limited, HSBC, Standard Chartered Bank (Hong Kong) Limited, the Hong Kong Branch of Agricultural Bank of China Co., Ltd., and other three banks will act as the joint coordinators.

Comments:

With the environment of US downgrading, Europe financial crisis, and the growth potential of RMB, the new issuance of China sovereign debt will easily become preferred by investors. It also help the internationalization of RMB and make Hong Kong the RMB offshore center.

Source:

The U.S. analysts believe that the U.S. debt crisis has triggered a ‘domino’ effect, is spread rapidly worldwide Was considered a ‘safe haven’ of U.S. debt has been downgraded for the first time in history, U.S. credibility has been an unprecedented questioned. Indeed, the U.S. debt crisis of U.S. dollar assets to the Chinese a huge risk, but on the other hand, a weak dollar also makes the yuan to enhance its appeal. the next 10 years, the U.S. government will face a continuing deficit reduction process, while the dollar made, or will be 10 years of decaying, the RMB is concerned, it is 10 years of increasingly powerful in the 10-year period of strategic opportunity, China established in accordance with their own rhythm to promote the process of internationalization of the RMB.

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Reuters recently reported that, for global investors, Asian sovereign bonds look increasingly becoming a safe haven on the grounds that, even in the market concerns about global economic growth, U.S. and European debt crisis and a volatile stock market situation, the performance of Asian sovereign bonds is still very strong. This is not to say that investors believe that Asian countries can escape the global slowdown in major economies, but compared with the United States and the European Union, the Asian economies generally have a healthy balance sheet.

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Ministry of Finance to issue RMB bonds in Hong Kong has the effect of policies serve multiple purposes. First, help to further accelerate the process of internationalization of the RMB. The second is to help promote Hong Kong’s renminbi offshore center, consolidation of the international financial center. Third help form an effective mechanism for the renminbi back. Fourth, to help absorb some liquid and hot money.

Okay, I didn’t know this…

**Dim Sum Bond:

A bond denominated in Chinese yuan and issued in Hong Kong. Dim sum bonds are attractive to foreign investors who desire exposure to yuan-denominated assets, but are restricted by China’s capital controls from investing in domestic Chinese debt. The issuers of dim sum bonds are largely entities based in China or Hong Kong, and occasionally foreign companies. The term is derived from the Chinese cuisine that involves serving a variety of small delicacies and is especially popular in Hong Kong.

Read more: http://www.investopedia.com/terms/d/dim-sum-bond.asp#ixzz1VCkd42OK