Chinese companies plan up to US$15 billion in overseas bond issues in Q4
They are reacting to Beijing’s stimulus package, which nudges corporates to expand and could wake up the moribund economy, banking official says
CHINESE investment-grade companies are lining up US$10 billion to US$15 billion in offshore bond offerings this quarter, as Beijing’s economic stimulus measures cut fundraising costs and whip up borrowers’ appetites, financial advisers said.
Those levels mean Chinese companies are poised to raise the most fourth-quarter offshore debt in three years. They garnered about US$5.9 billion in dollar and euro bonds just last week, making it the busiest week for offshore debt fundraising in 2024, Dealogic data showed.
“The positive momentum from the stimulus measures and the expected FOMC (Federal Open Market Committee) rate cuts could nudge issuers who are nimble and ready to come to market more quickly – they could look at windows in the coming weeks,” said Sun Xixi, Citigroup’s head of Greater China bond syndicate.
China, in the past fortnight, has launched a massive stimulus programme that includes cutting lending and mortgage interest rates, in an attempt to resuscitate the country’s crisis-hit property sector.
Beijing also plans to issue about two trillion yuan (S$369 billion) worth of sovereign bonds this year to boost household consumption, Reuters reported last week, citing sources with knowledge of the matter.
Ratings agency Fitch said in a report this week that China is moving faster than expected to loosen the country’s credit conditions.
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The US Federal Reserve cut interest rates by 50 basis points (bps) last month, putting the country’s economy firmly on a path of lower interest rates.
Credit spreads for Chinese investment-grade firms have tightened by 10 to 20 bps since the government’s stimulus measures were announced last month, bankers said. This indicated that investors’ risk appetite towards China was improving.
Falling interest rates and tighter credit spreads will reduce funding costs for Chinese corporates, they added.
Meituan, China’s biggest delivery platform, raised US$2.5 billion last week in a two-tranche US dollar bond – the country’s first technology sector deal in 2024.
Strong demand for the deal meant the final price was up to 30 bps cheaper than the range first flagged to investors.
Strong momentum
Beijing’s stimulus package will encourage corporates to expand their businesses, potentially leading to new funding needs and more financing activities via bond or other channels, said Mandy Zhu, UBS vice-chairman of global banking for Asia.
The bank sees “strong momentum in the bond market and strong investor demand in both the primary and secondary space”, she said.
The up to US$15 billion of overseas bond offerings planned by the Chinese companies in the current quarter is more than the US$13.8 billion raised in the same period of last year, and the US$11 billion raised in the fourth quarter of the year before, LSEG data showed.
The overseas debt issuance rush could continue into next year as Chinese companies obtain regulatory approvals and quotas, said Citi’s Sun.
Chinese companies raised the equivalent of about US$63.3 billion in US dollar, euro and yen bonds in the first three quarters of 2024, LSEG data indicated. This was up from US$44.1 billion in the same period last year.
Despite the increase, China’s offshore debt issuance is down by more than half, from a peak of US$150.1 billion in the first three quarters of 2020, when pandemic stimulus measures globally prompted record amounts of such deals. REUTERS
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