China’s Ministry of Finance is set to raise 15 billion yuan (US$2.22 billion) through a sovereign bond auction in Hong Kong, tapping international capital just days after the city launched a long-awaited tool designed to help global investors hedge against mainland bond market risks.
The sale marks the fourth tranche of Beijing’s 84 billion yuan sovereign bond programme for the year approved by the State Council, China’s cabinet. The exact tenors and yields would be announced by the Hong Kong Monetary Authority’s Central Money Markets Unit, the finance ministry said.
Market watchers anticipate robust investor appetite, driven by a shortage of high-quality yuan-denominated assets and expectations that the currency will appreciate.
The auction on Wednesday comes two days after a milestone for Hong Kong’s capital market. On Monday, the city’s bourse debuted its first offshore China government bond (CGB) futures contract. Based on five-year notes, the new financial instrument fills a crucial gap for global investment funds exposed to onshore fixed-income assets.
At Monday’s listing ceremony, Financial Secretary Paul Chan Mo-po described the new futures contract, together with Swap Connect, as crucial instruments in creating “a more comprehensive risk management framework for offshore renminbi fixed-income products”.
At the same event, Wu Qing, chairman of the China Securities Regulatory Commission (CSRC), called the launch “a milestone” for Hong Kong’s role as a bridge between mainland and global capital. He also signalled further steps to widen cross-border access, including a potential trust connect scheme for real estate investment and enhanced southbound trading under Stock Connect – where mainland investors buy and sell Hong Kong-listed shares.
“Given the limited offshore yuan assets, the bond issuance is likely to attract strong investor demand,” said Gary Ng, senior economist for Asia-Pacific at Natixis Corporate and Investment Bank, referring to Wednesday’s auction.