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HSBC bags sales of yuan bonds

HSBC has become the first overseas bank to sell yuan-denominated bonds in Hong Kong, raising funds for its Chinese mainland operations at a time when the mainland is trying to increase acceptance of its currency in the region.

HSBC priced a 1-billion-yuan, 2-year floating rate note at a spread of 38 basis points over the three-month Shanghai interbank offered rate yesterday.

The mainland has gradually begun using its economic prowess to create a larger role for the yuan with moves such as allowing foreign lenders to sell yuan-denominated bonds and permitting settlement of trade in the currency.

Last month, HSBC and the Bank of East Asia became the first overseas lenders to be approved to issue yuan bonds in Hong Kong.

Overseas banks, which have a limited network on the mainland, have a narrow funding base and the HSBC issue is likely to give a benchmark for other foreign borrowers expanding their yuan financing needs.

"Overseas banks are eager to raise yuan funding as they relay on the interbank market for yuan funding as their yuan deposits are not strong enough to support their operational growth on Chinese mainland," said Daniel Chan, a senior investment strategist at DBS Bank. "But how much they can issue depends on the approval of the mainland government."

The issue was targeted at institutional investors and is the first overseas entity among the growing number of borrowers eyeing Hong Kong's 53-billion-yuan deposit.

Five mainland banks have issued a total of 22 billion yuan worth of yuan bonds in Hong Kong since 2007.

"Through this bond issue we seek to support the development of Hong Kong's yuan market and to help establish a representative pricing benchmark," said Vincent Cheng, chairman of HSBC Bank Co.


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