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A long-touted equity link between London and Shanghai is set for take-off by the end of the year, but the most unsurprising news to emerge is HSBC’s plan to use it for a Mainland listing. China now has an excellent chance to get its act together on Chinese Depositary Receipts.
China’s impending Panda bond framework offered the country a chance to sort out a messy approval process that deters all but the most dedicated issuers. Instead, the country doubled-down on chaos.
Bond index providers are racing to include Chinese bonds in their benchmarks. But before taking the leap, they should study a recent decision on A-share inclusion — and the sceptical response it got from investors.
The decision of China’s exchanges to bar mainland investors from dual-class stocks may not seem like much in the grand scheme of things, but it is the darkest moment for China's market reform path since the infamous summer of 2015.
Chinese president Xi Jinping delivered the message everybody wanted to hear: despite the trade spat with the US, China will keep opening up its markets to foreign firms. But the speech was light on substance. The remarks feel like more of China’s vintage ‘stall and delay’ strategy rather than the much-touted ‘new era’. That could backfire, especially since Donald Trump seems hell-bent on making his aggressive trade policy towards China a reality.
Panda bond issuance has so far been dominated by overseas-incorporated Chinese names. That bolsters volumes, but it does little to help the market fulfil its role of boosting RMB internationalisation. Policymakers have the chance to fix it — but only if they are bold enough to let markets play a bigger role.
China’s offshore renminbi bond market has made a strong start to the year, with two foreign issuers already selling dim sum notes. The signs for a robust 2018 are there but the market’s return to form will be contingent on more than just issuer interest.
DCM bankers often market Panda bonds as Belt and Road bonds, even when they have little to do with China’s landmark infrastructure plan. But in recent weeks, issuers with genuine needs for funding Belt and Road projects have started to tap the market. The change could open up a new frontier for RMB internationalisation.
Foreign ownership reform in the Chinese financial sector is not only a landmark in the country’s opening up, but also a strategic move to rebalance US-China trade. But recent guidelines curtailing banking sector liberalisation appear to be a case of one step forward, two steps back for China. Now more than ever, Beijing must not let its caution around financial risk take over and undo its strategy.
The hubbub over China’s five-yearly Party Congress is now behind us and the country’s regulators are ready to get back to business. In that vein, unusually forceful comments from Zhou Xiaochuan, outgoing governor of the People's Bank of China, on the urgency of deleveraging are more than welcome.
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Latest news by market and league table performance
GlobalRMB Panda Bonds league table
|Rank||Arranger||Share % by Volume|
|1||China Merchants Securities Co||26.40|
|2||Industrial and Commercial Bank of China (ICBC)||20.00|
|4||Agricultural Bank of China (ABC)||12.00|
|5||Bank of China (BOC)||11.33|
Panda Bond Database
|Pricing Date||Issuer||Country||Size Rmb (m)|
|1||13-Mar-19||Global Logistic Properties via Iowa China Offshore Holdings||Hong Kong||3,300|
|2||12-Mar-19||United Overseas Bank (UOB)||Singapore||2,000|
|3||05-Mar-19||BMW Finance N.V.||Germany||3,000|
|4||01-Mar-19||Semiconductor Manufacturing International Corp (SMIC)||China||1,500|
|5||25-Feb-19||New Development Bank||China||3,000|
Offshore RMB Bond Top Bookrunners
|Rank||Bookrunner||Share % by Volume|
|1||Standard Chartered Bank||46.13|
|2||Haitong International Securities||9.55|
|2||Guotai Junan International||9.55|
Latest Offshore RMB Bonds
|Pricing Date||Issuer||Country||Size Rmb (m)|
|1||13-Mar-19||Daimler International Finance||Germany||1,000|
|2||05-Mar-19||Fantasia Holdings Group Co||China||1,000|
|3||26-Feb-19||Far East Horizon||China||440|
|4||22-Feb-19||Asian Development Bank (ADB)||Philippines||300|
|5||31-Jan-19||Emirates NBD||United Arab Emirates||400|