HONG KONG: China completed its sale of 12 billion yuan ($1.57 billion) in dim sum bonds in Hong Kong to institutional investors and central banks on Thursday, the seventh year the Ministry of Finance (MOF) has tapped the market to bolster its development.
Four tenors were available, including a 5 billion yuan three-year tranche, a 3 billion yuan five-year tranche and 1 billion yuan each of a 10-year and 20-year tranche.
The bonds were priced at 3.29 percent, 3.4 percent, 3.31 percent and 4 percent for the above tenors, respectively.
"Pricing for longer tenors was in line with our expectation, but pricing for the three-year tenor was higher than our forecast," said Frances Cheung, head of Asian ex-Japan rates strategy at Societe Generale.
"Foreign investors may have priced in the yuan depreciation factor for the short tenor while longer ones were less affected by the FX factor," said Cheung.
Societe Generale expected the bond to be priced at 2.95-3.15 percent for the three-year tenor, 3.10-3.25 percent for the five-year tenor, 3.20-3.40 percent for the 10-year tenor, and 3.80-4.00 percent for the 20-year tenor.
The Chinese currency has fallen by 3 percent year-to-date against the dollar and foreign exchange analysts polled by Reuters expect further slippage over the next 12 months as China continues to ease monetary policy.
The MOF also sold 2 billion yuan of dim sum bonds to central banks and regional monetary authorities, which saw a total subscription amount of 2.098 billion yuan, according to statistics from the Hong Kong Monetary Authority.
Another 2 billion yuan worth of offshore yuan bonds will be sold to retail investors in Hong Kong later this week.
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.
It planned to sell a total of 28 billion yuan bonds this year, the same as last year's size. The first batch of the bonds worth 14 billion yuan was sold in May.
Bank of Communications Hong Kong branch is the issuing and lodging agent for the bond.
The dim sum bond market is facing strong headwinds this year as Chinese issuers have switched back to the onshore market for cheaper funding, while investor demand has been curbed due to the yuan's depreciation.
Analysts said the MOF sale was unlikely to revive weak sentiment in the dim sum bond market as investors worry about depreciation pressure on the yuan currency and eye lower funding costs on the mainland.
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