Already at the top of the rankings of international banks for the subscription, last year in Hong Kong, of 32.9 billion yuan of Dim sum bonds and a prominent member of the task force set up by the authorities of Hong Kong and the United Kingdom to facilitate the development of the City of London as an offshore center for the renminbi market, HSBC marks another milestone in the offshore renminbi market. In fact, at the end of April, the banking giant undertook toLondon offering of 2 billion renminbi (US$317m) in three-year bonds at a rate of 3%.
Stuart Gulliver, CEO of HSBC, expressed the company's pride in carrying out this issuance, commenting on the importance of this operation as an initial moment in the development of the City as an international trading center for the renminbi, as well as the huge potential that this market represents.
In reality, the banking giant is not the first to offer dim sum bonds outside the Chinese borders. Forerunners in issuing foreign bonds denominated in renminbi were large multinationals such as Caterpillar, McDonald's, Volkswagen and America Movil. Nor can HSBC boast the primacy of having offered Dim sum bonds first in London: last September, the energy giant BP was in fact the first in the City to issue three-year bonds for a value of 700 million renminbi, an operation which was developed by HSBC in collaboration with Standard Chartered.
The enthusiasm that followed HSBC's dim sum bond placement in April is not without recognition, however. It's about the first issue of bonds denominated in renminbi aimed specifically at the European market: 60% of these securities were placed among European investors (the remaining 40% was instead allocated among Asian operators). Unlike the issue carried out by BP, aimed essentially at Hong Kong institutions, the offer of Dim sum bonds by HSBC also stands out for the target to which it was addressed: with bonds of 10.000 renminbi (instead of 1 million, as typically occurs in practice), the offer of HSBC has ensured, in particular, accessibility to the retail sector. Indeed, this operation stood out for having been the first issue of securities denominated in Chinese currency listed and traded on the ORB platform (Order book for retail bonds) of the London Stock Exchange.
Following this initial issue, orders were collected for approximately 4.4 billion renminbi, demonstrating the potential of this market. And if HSBC can be said to have opened the ball, the big Chinese banking giants are also preparing to take to the track: Agricultural Development Bank of China, China Development Bank and Export-Import Bank of China are just some of the banks in the Dragon are preparing to list Dim sum bonds on the London Stock Exchange.
The announcement of the People's Bank of China, about the decision of the Chinese authorities to widen the fluctuation band of its currency against the dollar, from ±0,5% to ±1%, will undoubtedly affect the volume of dim sum bond issues. A twice as wide fluctuation band for the USD/RMB exchange rate could in fact dissuade speculators from subscribing to securities denominated in the Chinese currency, moved by the expectation of a constant and continuous appreciation of the same against the dollar. But while such an attitude would lead to a moderation in the supply of dim sum bonds, on the other hand it could lead the renminbi market to achieve greater maturity.
