Bond gateway to China reopens

China Communications Construction, Yuexiu Transport embark on roadshows as sentiment for mainland Chinese names improve thanks to a new wave of government support.

China Communications Construction and Yuexiu Transport have announced regional roadshows as they become the first mainland Chinese issuers to reopen the pipeline in the second quarter.

Debut issuer China Communications Construction, a Beijing-based construction company, will begin investor roadshows from April 9 onwards for a potential Reg S-only perpetual bond, according to an announcement made to the Hong Kong Stock Exchange on April 8.

Investor meetings will begin in Hong Kong, Singapore, and London for the dollar-denominated security, which will be guaranteed by the company, according to a source familiar with the matter. HSBC, Morgan Stanley, and UBS have been mandated to arrange the meetings.

Also an inaugural issuer, Yuexiu Transport, a company that principally operates and invests in expressways in Guangdong province, will begin investor roadshows from April 9 until April 13, according to a source close to the deal.

Bank of China (Hong Kong), Bank of China International, HSBC, JP Morgan, and Nomura have been mandated to arrange Yuexiu Transport's investor meetings.

The Asian credit market was well supported last week thanks to China's new wave of property easing measures and better-than-expected economic data.

“April and May is going to be very China-laden,” a Hong Kong-based debt syndicate banker said, adding that the blackout period for mainland Chinese companies has now ended.

The Asian investment grade sector saw spreads 2 basis points to 5 basis points tighter over the past week. BBB-rated Chinese names outperformed with spreads 5bp tighter, according to Kenneth Ho, credit analyst at Goldman Sachs.

On the high-yield side, China property outperformed, with single-B names rallying by 0.5bp to 3bp, and BB names rallying by 0.5bp to 1bp, Ho said.

Better data, policy easing

China’s official manufacturing purchasing managers’s index, or PMI, improved to 50.1 in March from 49.9 in February, lifting it back into expansion territory. But as property prices continued to fall in March and manufacturing PMIs have just started to show signs of improvement, policy loosening is expected to continue, credit analysts said.

The People's Bank of China said on March 30 that commercial banks can now lower the minimum down payment requirement for buyers of second homes or clients with outstanding mortgages, to 40% from 60% previously.

Separately, the Ministry of Finance said that individuals selling an ordinary house were exempt from business taxes if they had owned it for more than two years, compared with at least five years previously.

“Because of the favourable policies announced by the Chinese authorities, investors may put money to work in the double-B high quality names rather than the single-Bs,” said a banker working in debt capital markets. “China’s going to be dominant this quarter, with some coming from the real estate sector.”

Dollar issuance from Chinese corporates reached $11.36 billion in the first quarter, 15.3% more than last year’s volume during the same period, according to Dealogic data.

However, this is still lower than last year’s second quarter dollar-denominated volume of $30 billion from Chinese companies, which DCM experts believe this quarter is likely to match or slightly exceed.

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