The London branch of Bank of China raised Rmb2.5 billion ($413 million) on Thursday night; the largest renminbi bond in the city from a commercial financial institution.
As a comparable, Industrial and Commercial Bank of China issued Rmb2 billion bonds in London through dual-tranche notes in November. Its Rmb1.7 billion three-year tranche was priced at 3.35%.
It is also the first issue from the London branch of any Chinese bank to the offshore renminbi market.
“The deal will not only diversify our fundraising channels but also provide one more renminbi product for local investors,” a spokesperson with BOC’s London Branch told FinanceAsia.
The issuer priced the three-year notes at 3.45%, the tight end of the indicative price range of 3.45%-3.5%. The initial guidance area was of 3.5%. Proceeds will be kept in the city and used for general corporate purposes.
The deal has attracted 119 orders worth Rmb5 billion, leaving the book two-times covered. Fund managers or asset managers accounted for 52% of the take-up, private banks 20%, banks 16% and corporate and insurance companies 12%.
What makes the deal more successful is the decent distribution in Europe. Investors took 40% of the deal, the largest proportion from the area ever seen in offshore renminbi issues so far. Asian investors took 60%.
“This is a very positive trend that means European investors are more and more comfortable in CNH issues and they have confidence in Chinese issuers,” said a source familiar with the situation.
The offshore renminbi market has had a decent start this year and will continue to be active, according to market watchers. The overall market is stable, liquidity is good, investors are confident in China’s economy and Chinese names and the market is getting more mature.
What is also important is that the expectation of renminbi appreciation is still there as the market widely believes the currency will continue to appreciate this year at a rate of 3%-5%. The renminbi bond index of Bank of China (Hong Kong) recently hit a record high of 107.49, signaling that the overall renminbi bond price is increasing due to good sentiment.
Peking University Founder Group on Thursday also priced its first offshore renminbi bond of Rmb1.2 billion, the first from a corporate this year. The deal was priced at 5.875% and secured subscription of Rmb4.6 billion from 76 accounts.
Hong Kong and Singapore investors took 57% and 42% of the deal, respectively, and other investors got the rest. 38% of the orders were from fund managers, 45% from private banks and retail investors and 17% from banks.
China Electronic and Trade and Development Bank of Mongolia (TDBM) are also looking to raise funds from the Dim Sum market for the first time. China Electronic has opened books, while TDBM will finish meeting investors on Friday and is likely to open books next week.
Bank of China was sole global coordinator on its own London deal, while Bank of America Merrill Lynch, HSBC and UBS were joint bookrunners. DBS was sole bookrunner on the Founder transaction.
