HSBC tests City appetite for dim sum bonds

HSBC saw strong demand from investors when it issued the first ever renminbi-denominated bond sold outside Chinese territory yesterday, raising 2bn yuan (£200m) in London.

With investors subscribing for twice the issuance amount, the bank paid just three per cent interest on the three-year bond. Most of the debt was bought by European investors.

The transaction, which was advised by Clifford Chance’s Habib Montani, is the first time that any company has raised money in the Chinese currency outside of China or Hong Kong.

It follows a series of steps loosening control over the renminbi by the People’s Bank of China (PBOC) and the Hong Kong Monetary Authority.

The PBOC recently also relaxed controls over how much the renminbi can appreciate each day, doubling the size of the band in which it trades versus the dollar.

London is keen to grab a large slice of the action as China allows the internationalisation of the renminbi, seen as a precursor to it becoming another of the world’s reserve currencies.

Establishing the UK as the biggest non-Chinese renminbi trading centre would boost London’s status as the world’s biggest forex market and is being aggressively pursued by British banks and the Treasury.

HSBC’s head of emerging market forex David Pavitt said: “The market needs to mature”, which will involve growing demand and better infrastructure in banks to enable hedging against the difference between onshore and offshore renminbi.