OCBC debt market efforts in China's Greater Bay area bearing fruit

Singapore

OCBC Bank's capital market efforts in China's Greater Bay (GBA) area are bearing fruit.

Year to date, the bank has been involved in 10 GBA international bond transactions worth US$8.4 billion.

The 10 bonds were made up of eight USD transactions totalling US$8.18 billion and two SGD transactions worth S$300 million. One notable deal last month was the green bond for China General Nuclear Power Corporation, a state-owned enterprise headquartered in Shenzhen.

Last year, OCBC was involved in only one GBA bond deal worth US$800 million.

The GBA refers to a region comprising Hong Kong, Macau and nine cities in the Pearl River Delta in China's Guangdong province. China is aiming to grow the GBA to rival and surpass the likes of Tokyo, New York and San Francisco and become the world's largest bay area by GDP by 2030.

The GBA last year accounted for 12 per cent of China's GDP even though it covered less than 1 per cent of the land area and 5 per cent of the population.

In 2014, OCBC acquired Hong Kong's Wing Hang Bank, launching its strategy of capturing investment and capital flows between China and South-east Asia.

Said Tan Kee Phong, OCBC head of capital markets: "The growth potential of the Greater Bay area remains significant and undeniable.

"As the region continues to develop economically, both state-owned and privately-owned enterprises will increasingly choose to finance their expansion by accessing the international and domestic debt markets," he said.

"OCBC's geographic reach and on-the-ground presence across our core markets have allowed us to present GBA-related entities with the option of diversifying their funding sources, not just among US dollar investors, but also those in the Singapore dollar bond market," said Mr Tan.

OCBC is the second-largest player in the Singapore dollar bond market with 23 per cent market share. So far this year, the bank has helped three Chinese developers tap the SGD bond market. The three are Central China Real Estate's S$150 million issue, Logan Property's S$200 million issue and a dual currency issue by China Aoyuan Property Group.

OCBC was the sole lead manager and bookrunner on China Aoyuan Property Group's S$100 million bond and joint lead manager and bookrunner on the US$225 million tranche.

This was the first-ever USD/SGD dual currency bond by a Greater China real estate issuer and China Aoyuan's debut SGD bond issuance, said Mr Tan.

Chinese property developers have been tapping the Singapore dollar bond market for a variety of reasons, he said.

"The most obvious need for SGD funding would be in the case of real estate players expanding their footprint with developments in Singapore," said Mr Tan.

Logan Property and Nanshan Group are developing the 1,259-unit Stirling Residences.

Chinese developers are also fundraising in SGD for strategic reasons, said Mr Tan.

The China Aoyuan issue is unique in that it is the first-ever USD and SGD two-tranche deal by a Chinese developer, he said. Its debut SGD bond issuance helps the company hedge against FX risk arising from a strengthening USD, he explained. With the majority of its liabilities denominated in USD, fundraising in SGD offers a natural hedge, given the more gradual appreciation of the SGD against the CNY, compared to the USD, said Mr Tan.

"Accessing the SGD market therefore enables the issuer to lower its average funding cost and diversify its investor base," he added.

OCBC also went green when it handled China General Nuclear Power Corporation's (CGNPC) fundraising last month.

The transaction was a multi-tranche bond issue, comprising US$500 million 5-year bonds, US$100 million 30-year bonds and 500 million euro (S$792 million) 7-year bonds. Only the 500 million euro tranche was green.

The 500 million euro notes represented OCBC's first green bond transaction and the first green bond issue by a state-owned enterprise in the GBA in 2018, said Mr Tan.

CGNPC is the only nuclear power-focused clean energy corporation that is directly supervised by the Assets Supervision and Administration Commission of the State Council.

The green bond market continues to develop as a source of funding for projects and assets that further sustainable goals, said Mr Tan.

"Investors are increasingly paying attention to environmental, social and governance issues and consciously supporting sustainable development through their investments."