A new bond market
Among the many developments triggered by liberalization is the creation of a new bond market. Although an offshore renminbi bond market targeted at Hong Kong retail investors has existed since 2007, this new creation is more of a renminbi Eurobond market.
Bragging rights have gone to three deals: an Rmb200 million ($30 million) bond for McDonald’s, the first corporate deal for a multinational; Rmb1.4 billion from Hopewell; and a certificate of deposit deal worth Rmb500 million from Citic Bank.
These deals followed a decision in February by the Hong Kong Monetary Authority, with China’s support, to allow renminbi bond business to be carried out in Hong Kong in accordance with prevailing banking practices, so long as it did not entail any flow of renminbi funds back to the mainland. "This essentially opened up the RMB bond market to any issuers that are eligible to issue bonds in Hong Kong," says Tee Choon Hong, regional head of capital markets for north Asia at Standard Chartered, which led the McDonald’s bond. "There are no more restrictions as long as the credits are acceptable by investors in Hong Kong. That changed the rules, the game plan, entirely. It opens up that market to the whole world."
While Hopewell was the first and the biggest deal, it was still seen as something of a local name; it was McDonald’s that captured the headlines. It was issued by the parent, out of Chicago, not by some local subsidiary; it came off an existing MTN programme; and it is one of the most famous multinationals.