China sells first sovereign bonds in casino hub Macau, sees strong demand

HONG KONG: China has sold the first tranche of a two billion yuan ($291.11 million) bond in Macau, as the Chinese-ruled territory tries to diversify from its dominant gaming industry.

The Ministry of Finance said in a statement on Friday it sold 1.7 billion yuan of 3-year bonds at a 3.05% coupon to institutional investors on Thursday, ranging from pension funds to commercial banks.

The tranche was 3.2 times oversubscribed.

The ministry said it will sell a 300 million yuan, 2-year retail portion at a 3.3% coupon starting on Friday. Subscription to that bond will be open until July 19, according to Refinitiv IFR.

The yield came in slightly above expectation, said Frances Cheung, head of macro strategy, Asia, at Westpac Banking Corporation. But she said "the oversubscription suggests demand is still strong, when there is enough pick-up for investors."

Macau's monetary authority told Reuters in a statement the bond issuance "is one of the key measures to promote the adequate economic diversification" in the city.

Macau, which generates about 80% of government revenues from gambling, is considering launching a yuan-based stock market to help it diversify away from gaming, the city's de facto central bank told Reuters last month.

It is also beefing up financial services under China's Greater Bay Area plan to integrate the territory with Hong Kong, the largest offshore yuan hub, and nine mainland cities.

The former Portuguese colony will mark its 20th anniversary of return to Chinese rule in December. Macau has its own currency, the pataca, which is linked at a fixed rate to the Hong Kong Dollar.