Total demand for the Rmb5 billion two-year offering reached Rmb11.5 billion on Friday. Offered in two tranches to retail and institutional investors, the book sizes stood at Rmb4 billion and Rmb7.5 billion respectively.
At the time of writing, tranche sizes had not been determined, but sources say retail investors will have access to at least Rmb1 billion worth of bonds. This amount may be upsized, however the total size of the deal will not exceed the allocated Rmb5 billion authorised by the PeopleÆs Bank of China.
The bonds destined to retail investors will be distributed via 14 licensed banks namely HSBC, Bank of China, Bank of Communications, Bank of East Asia, China Construction Bank, Citic Kah Wah Bank, Dah Sing Bank, Hang Seng Bank, Standard Chartered, Wing Hang Bank, EBS Bank AG, ICBC Asia, Wing Lung and Nanyang Commercial Bank. The minimum subscription for an individual investor is 20,000 yuan.
ôI have heard this transaction has been very well received, and I expect more such issuance from China policy banks and other state-owned banks," says a bond market source. "Overall this is a good and positive move, allowing financial institutions an avenue to invest in renminbi-denominated assets, and Hong Kong residents and citizens an opportunity to get a significant return from a top-rated institution, in securities form.ö
The offering comes as a result of the PeopleÆs Bank of China allowing Chinese financial institutions to issue bonds in the interbank market. Until now, those in Hong Kong with a view on renminbi could only express it by opening renminbi-deposit accounts offering 0.6%-0.7% per annum for a six-month deposit.
Now, China Development Bank is offering, for the first time, the opportunity to invest in yuan-denominated bonds offering a 3% interest rate for two years. Since expected renminbi-appreciation, based on historical data, should be in the order of 4%-5% per annum, investors can expect a total expected return of 7%-8% from this transaction.
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