HSBC has announced its plan to
launch the first renminbi (RMB) denominated bond outside of
Chinese territories. The
benchmark-setting issue will help establish
Londons status as a global hub for RMB
Clifford Chance has
confirmed to IFLR that it is legal counsel to
HSBC as issuer on the three-year, unsecured bond.
Set to be listed on the
London Stock Exchange and distributed within Europe and Asia,
the bond was priced with a yield of 3% and the transaction
closed with a book size more than twice the issue size.
According to a HSBC
statement released last week, the transaction saw
very strong demand from both European and Asian investors, with
over half of the allocation going into European accounts.
It is expected to raise over Rmb2 billion (£197
Allen & Overys capital markets
partner Matthew Hartley said it was encouraging that the issue
attracted strong demand from a European investor
RMB liquidity, or the lack thereof, will pose a major challenge
for future development of the market. The currency is still not
This transaction has demonstrated
that there is sufficient liquidity in both Europe and Asia to
cover quite a lot of funding at the moment, he said.
But it is unclear how many more of these issues the
market will support.
Until the regulations are further
relaxed, a limited pool of funding will be available, he
Hartley compared the
development of the RMB market with that of the euromarket 50
years ago, when it started to tap into US dollars held
inconceivable that, if there is further liberalisation, RMB in
the future could be a currency of choice for euromarket
funding, alongside dollars and euros, said
The bond issuance follows
the 2011 agreement between British and Chinese
governments to develop RMB
trading in London. And coincides with the
announcement this month by Chinas central bank, the
Peoples Bank of Chinas (PBOC)of
its intention to develop a direct international payment system
for RMB, the China International Payment System (Cips).This
will open its cross-border RMB payments system to banks around
the world and operate according to the worlds major time
Pridmore said Cips would effectively take over the Hong Kong
infrastructure currently used to trade RMB on- and off
shore.The great thing is that London is able to plug
straight into this, he said.
The deal announcement also
coincided with City of London Corporations April 18
launch of a working group aimed at making the city the dominant
offshore hub for RMB business. The initiative brings together
representatives from five major banks and is supported by HM
Treasury, the Bank of England and the Financial Services
a speech to commemorate the launch, UK Chancellor of the
Exchequer George Osborne welcomed the move. Praising London for
its long history of financial inventiveness, he said RMB
trading was the next step along a 400 year road.
We are not prepared
to let anyone steal a march on us in terms of new products and
new markets, he said
By the end of 2011, the
volume of RMB deposits in London totalled Rmb109 billion
(£11 billion). Rmb35 billion of this is customer
deposits. The annual trading volume in offshore RMB bonds is
now at Rmb28 billion.
expects the international RMB bond market to reach Rmb1
trillion within three years, as demand for RMB-denominated
As noted by the
BBC, the banks move to raise the money for itself
rather than for a client could signal its enthusiasm to be part
of the liberalisation of the Chinese market. Inter-bank
borrowing would have cost it much less.
HSBC currency strategist
David Bloom told the BBC: "HSBC
want it and they want it bad. China is opening financial
services to the world and the question is do you want to be
part of it or not? And the answer is yes we do".
here to read about
PBOCs decision to widen the RMB trading band against the