HSBC’s 4.5 billion yuan panda bond to boost globalisation of Chinese currency

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The bond, which pays an annual coupon of 2.15 per cent, also reinforces Hong Kong’s role as the world’s offshore yuan centre, bank says

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Yuan deposits in Hong Kong exceeded 1 trillion yuan for six months in a row up to September, according to HKMA. Photo: EPA-EFE

Aileen Chuang

Published: 10:07am, 13 Nov 2024

HSBC has issued a 4.5 billion yuan (US$623 million), three-year panda bond that will be remitted to Hong Kong, reinforcing the city as the world’s offshore yuan centre and supporting the currency’s internationalisation.

The sale was increased from a base size of 3 billion yuan after the order book was oversubscribed by 1.88 times, the bank said in a statement on Wednesday. It is part of the bank’s 10 billion yuan bond-sale programme approved by China’s central bank to be issued in phases until October 2026.

The bond pays an annual coupon of 2.15 per cent and was assigned the highest triple-A rating by China Chengxin Credit Rating Group.

The deal represents the UK banking group’s first such issuance since the Chinese government allowed the proceeds of panda bonds to be repatriated in 2022. Previously, offshore companies needed the State Administration of Foreign Exchange’s approval. HSBC raised 1 billion yuan from its first panda bond offering in 2015.

Panda bonds are yuan-denominated securities issued by offshore companies in mainland China.

Pedestrians seen outside HSBC’s branch in Tsim Sha Tsui in October 2024. Photo: Jelly Tse

The panda bond market has been booming since the rule was relaxed, with issuers taking advantage of the currency’s relatively low funding cost thanks to the wide interest-rate differentials with the US dollar. The yield difference could remain large as Beijing has hinted at more monetary easing measures to prop up the economy, and the US may slow rate cuts that could arise because of the inflationary risks brought by US President-elect Donald Trump’s tariff and fiscal policies.