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October 22, 2009

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Home » Business » Economy

Proceeds of yuan bond sale triple offer

THE Chinese mainland's first overseas sale of yuan-denominated bonds was three times oversubscribed in Hong Kong, reflecting investor confidence in the mainland's robust economy.

The sale drew 18 billion yuan (US$2.6 billion) in subscriptions, tripling the offer of the 6-billion-yuan issue for retail and institutional investors, the Ministry of Finance said on its Website.

Nearly 150,000 individual investors have applied for the bonds and the ministry pledged that each of them will gain at least one portion of 10,000 yuan, according to the statement dated Tuesday.

"The oversubscription reflected Hong Kong investors' confidence in the mainland's sustainable and healthy economy and social development, laying a solid foundation for improved financial cooperation between the mainland and Hong Kong," it said.

The two-year debt has a coupon rate of 2.25 percent while it is 2.7 percent for the three-year bonds. The five-year bonds, open only to institutional investors, have a coupon rate of 3.3 percent.

The issuance of the yuan-backed bonds in Hong Kong, to be launched next Tuesday, is seen as a key step toward the globalization of the yuan, market observers said.

China is pushing for a stronger role for the yuan in the global arena to match its rising economic power.

It agreed to use the yuan to buy up to US$50 billion worth of the International Monetary Fund's first bond issue last month. The IMF will lend the Chinese currency to its member countries in a step that will help promote the yuan as a future reserve currency.

The People's Bank of China earlier signed six currency swap deals worth 650 billion yuan. Since July, China has allowed Hong Kong and five mainland cities to settle cross-border trade in yuan.


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