S. Korea 1st to issue 鈥榩anda bond鈥
Print Edition
SOUTH Korea yesterday became the first foreign country to sell a yuan-denominated bond in China’s domestic market, amid rising foreign interest in raising funds on the onshore market.
The 3 billion yuan (US$464 million) so-called “panda bond” was sold at a yield of 3 percent after South Korea was approved to issue the three-year bond early last week, according to a statement from South Korea’s finance ministry.
The yield was the low end of the ministry’s price guidance of 3-3.5 percent, indicating strong demand for the bond.
The South Korean panda bond are assigned the highest AAA rating by Chinese rating agency CCXI, driven by South Korea’s stable economy, strong resistance to crisis and sound development prospects.
The coupon is consistent with the yield on the AAA-rated bonds currently traded on the market, such as 2.73 percent for China’s sovereign bond, 3.06 percent for Gansu Province’s local government bond and 3.33 percent for State Grid’s corporate bond, CCXI said.
“We believe that the bond can be safely repaid along with the deepening trade relationship between China and South Korea,” CCXI said in an e-mailed statement.
CCXI added that the rising demand for the yuan in South Korea, faster yuan internationalization, and new currency transaction mechanisms could facilitate bilateral trade.
Panda bonds — yuan-denominated bonds issued by foreign entities on the onshore market — will also allow South Korea to diversify its foreign-currency issuance, Song In Chang, director general of South Korea’s finance ministry, said last month.
Indonesia and Russia said they may follow by issuing panda bonds next year, while the Canadian province of British Columbia has registered to sell a 6 billion yuan debt.
Standard Chartered issued a 1 billion yuan three-year panda bond last week with a 3.5 percent coupon.
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