Nation's euro bond sale shows investors' confidence

陈小将

The overwhelming demand for China's latest offering of euro-denominated sovereign bonds reflected confidence of global investors in the country's sovereign credit and long-term economic potential, financial professionals and experts said.

They added that China's back-to-back issuance of two sovereign bonds in a month also highlights the country's commitment to high-level opening-up and deeper integration with global financial markets.

The Chinese Ministry of Finance raised 4 billion euros ($4.6 billion) through a dual-tranche offering in Luxembourg on Wednesday — selling 2 billion euros worth of four-year bonds with a coupon rate of 2.401 percent and another 2 billion euros of seven-year bonds with a yield of 2.702 percent.

The offering attracted total orders of 100.1 billion euros, 25 times the issuance amount. The seven-year tranche alone was oversubscribed more than 26-fold. The latest offering marks China's second foreign-currency bond issuance this month, with the first being a $4 billion dollar-denominated sovereign bond issuance in Hong Kong two weeks ago.

Wang Yunfeng, president of HSBC Bank China, said the country's back-to-back issuance of two sovereign bonds sent a positive signal to investors about China's commitment to high-level opening-up and deeper integration with global financial markets. HSBC served as a joint lead underwriter and joint bookrunner for the deal.

Bank of China, another joint lead underwriter, said the offering, which is China's first euro-denominated sovereign bond issuance in Luxembourg, helped further diversify the country's foreign-currency sovereign bond portfolio. It also provided global investors with a safe, high-quality asset and sent a clear signal of China's solid sovereign credit to international markets.

Moreover, analysts said the overwhelming response to the latest offering reflected global confidence in China's long-term economic development.

Samuel Fischer, head of onshore debt capital markets at Deutsche Bank China, a joint lead manager and joint bookrunner for the deal, said this issuance reaffirmed global investors' strong confidence in China's sovereign credit and macroeconomic fundamentals. "The deal further enhanced the prominence of Chinese assets in global fixed-income portfolios and strengthened China's benchmark positioning in the international capital markets," Fischer said.

Tian Lihui, university chair professor of finance at Nankai University, said the massive oversubscription of the seven-year tranche indicated that long-term investors see sustained opportunities in the Chinese market.

According to the finance ministry, the investor base was diversified in both geography and type, with more than half of the allocations going to European buyers and a sizable share to Asian investors. Sovereign institutions made up 26 percent of the investor base, while funds and asset managers accounted for the largest share, followed by banks, insurers and a small portion of dealers.

Lynn Song, chief Greater China economist at ING Bank, told Bloomberg that Chinese assets remained underweighted relative to the country's importance in the global economy, adding that a truly international investment portfolio seeking genuine global representation should include exposure to Chinese assets.

Speaking to Bloomberg, Keith Cheung, head of debt syndicate for Greater China and North Asia at Standard Chartered, said, "Global investors are actively seeking diversification, yet high-quality Asian sovereign bonds denominated in euros remain scarce."

"The deal will contribute to developing China's euro-denominated bond pricing system in the international arena, providing a benchmark for future euro-market financing by Chinese companies," said Timothy Huang, head of Global Corporate Banking for Greater China at JP Morgan, another joint lead underwriter and bookrunner for the offering.