Capital Markets, China, Hong Kong - Monday, December 21, 2009 14:38 - 0 Comments

Hong Kong’s RMB market a forerunner for convertibility

Credit Magazine, December 2010

In September Hong Kong’s renminbi bond market took a major step forward. To that point, it had been a fascinating but fairly insubstantial new venture, attracting some interesting credits but lacking the scale or liquidity to have broader impact. But then China’s Ministry of Finance launched a RMB6 billion sale of government bonds to retail investors in Hong Kong – and by the time the offer closed on October 20 had attracted bids for three times that much.

The deal was significant on a number of grounds. The 13^th RMB bond issue in Hong Kong, it was the biggest, the first by a sovereign, the first to come in multiple maturities, and it increased the market’s curve from three to five years. Not only did it provide a government pricing benchmark to this new market, it also represented the first time the Chinese sovereign had issued an RMB bond anywhere outside the Chinese mainland. And, in so doing, it heightened the sense that what’s happening with this market in Hong Kong is a tentative but vital step towards convertibility of the Chinese currency. Continue…

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