Luxembourg

The outcome of the Brexit referendum has cast a shadow over London’s ability to maintain its status as Europe’s foremost RMB business hub. In this lowdown, GlobalRMB pits three other European capitals – Frankfurt, Luxembourg, and Paris – against the City as the most likely contenders for Europe’s RMB crown.

The market reaction to the UK’s surprise decision to leave the European Union has been immediate with stocks falling, the pound weakening and the country downgraded by international rating agencies. But market participants are worried that the worse has yet to come and London could be set to lose its shine as a premium renminbi hub.

The Mutual Recognition of Funds (MRF) scheme has had a relatively slow start, but Chinese regulators are said to be looking at Luxembourg to expand the scope of the progamme, GlobalRMB has learned. But difficulties abound in bringing the project to reality.

Clearstream has confirmed that it is working with the Chinese authorities to establish a link between offshore investors and the China interbank bond market (CIBM). The firm also said it will boost its Stock Connect capabilities from July 4.

NordLB’s Luxembourg subsidiary issued its longest maturity covered bond on Tuesday and paid a paltry premium, but the double digit pick-up failed to draw much excess demand.

The Luxembourg-based producer of roof products, Braas Monier, proved there is still strong investor demand for double-B rated paper in the high yield market as it tightened pricing from guidance on Wednesday.

Westpac New Zealand issued a comfortably oversubscribed €750m five year covered bond on Tuesday and priced at the tightest spread ever for a New Zealand covered bond. At the same time, NordLB’s Luxembourg subsidiary issued a less well subscribed €500m seven year.

The Luxembourg subsidiary of NordLB will issue its longest covered bond yet, and one that should offer a double digit return, though covered bonds issued by German banks invariably price and trade well through mid-swaps.

The wave of rights issues and capital raisings in the market this summer is so far going smoothly, with good news this week for Banco Popular Español, as its shares and rights perked up in trading.

HLD Europe, a small and recently founded private equity firm incorporated in Luxembourg and backed by wealthy French investors, will raise up to €40m through a debut five year Euro private placement.

ArcelorMittal’s $3.015bn rights issue, as part of its $4bn debt cutting plan, was completed oversubscribed, the steelmaker said on Monday, despite the gloomy outlook for the European steel industry.

ArcelorMittal bowed to the inevitable and announced a $3bn rights issue last Friday morning, after its credit spread had widened to distressed levels as global steel prices slumped. Goldman Sachs, Bank of America Merrill Lynch and Crédit Agricole are global coordinators.