MOF issues $6 billion bonds in Hong Kong
▶ Move helps integration with global markets, supports SAR’s status
China issued $6 billion in US dollar-denominated sovereign bonds in the Hong Kong Special Administrative Region (HKSAR) on Tuesday, the nation’s largest ever foreign currency bond issuance.
Experts said that the issue is evidence of China’s comprehensive integration with international financial markets and the Chinese mainland’s support for the development of Hong Kong’s financial hub position amid months of social unrest in the city.
The bonds, which were 3.6 times subscribed, were divided into four tranches, including $2 billion of 10-year debt with a yield of 2.238 percent, read a statement by the Ministry of Finance (MOF).
The issue could help shore up Hong Kong’s position as a global financial hub, Zhou Yu, director of the Research Center of International Finance at the Shanghai Academy of Social Sciences, told the Global Times.
Along with the comprehensive opening-up of China’s financial market, diversified financing approaches are needed that will allow China to raise funds from all over the world instead of being restricted to the domestic market, Zhou said.
On Wednesday, the MOF also issued 5 billion yuan ($712 million) of yuan-denominated treasury bonds in Hong Kong. Similar issues were held in June and September in Hong Kong.
The MOF has issued a total of 15 billion yuan in yuan-denominated treasury bonds in Hong Kong since June.
These moves can help support the development of Hong Kong’s position as the leading offshore yuan hub and promote the internationalization of the Chinese currency, Zhou said.
According to the Hong Kong Monetary Authority (HKMA), Hong Kong has the largest yuan capital pool outside of the Chinese mainland with a scale of more than 600 billion yuan, which could help support the booming offshore yuan business.
Hong Kong, as an open market, could offer an approach to promote the internationalization of the yuan, given that there are still more restrictions for foreign capital trading in the mainland than in Hong Kong, Zhou noted.
Also, as the largest offshore yuan bond market, Hong Kong is an important center for yuan financing with issuers including the MOF, as well as financial institutions and companies from around the world.
The situation could help to develop an offshore yuan yield curve, Zhao Qingming, a Beijing-based international finance expert, told the Global Times on Wednesday.
Since the interest rate on treasury debt is generally regarded as the risk-free rate in any country, it could be used as a basis to price other securities and debt, Zhao noted, though the 15 billion yuan Treasury bond is not “a big scale” for the overall development of the offshore yuan in Hong Kong.