ôThe fact that half of these bonds were allocated to retail investors û as opposed to the majority going to the Hong Kong banking system û makes this a truly landmark exercise,ö says a source. CDB guaranteed each investor a least one board-lot of the bond.
CDB had initially anticipated a retail tranche of Rmb1billion, with the possibility of an upsize. In the end, the retail and institutional tranches were split evenly, each attracting over Rmb7 billion in demand.
Peter Wong, executive director of HSBC, states in a press release that the bond offering marks a significant step towards the development of ChinaÆs overseas financial markets. ôThis is an important milestone in the development of Hong KongÆs bond market as part of continued efforts to reinforce the regionÆs position as an international finance centre,ö he added.
Vice chairman and chief executive of Bank of China, He Guangbei, says: ôWe are glad to see the overwhelming response and wide acceptance of the renminbi bonds by Hong Kong institutional and individual investors. The offering marks a good opening for mainland financial institutions to issue renminbi bonds in Hong Kong in the future.ö
The logistical aspect of the transaction proved significant and involved considerable manpower. Individual investors made 60,000 applications, paying for the bonds either by cheque or by direct debit, via the branches of Hong kong-based Chinese banks or local Hong Kong banks. These were Bank of China, HSBC, Bank of Communications, Bank of East Asia, China Construction Bank, Citic Kah Wah Bank, Dah Sing Bank, DBS, Hang Seng Bank, HSBC, ICBC, Nanyang Commercial Bank, Standard Chartered, Wing Hang Nank and Wing Lung Bank.
Institutional investors traditionally involved in euro or dollar bonds certainly did not have a significant presence in the institutional tranche, since such houses do not have a natural need for exposure to renminbi credit. Obvious lenders are local institutions with pools of renminbi deposits. It is likely, therefore, that the banks listed above were the main buyers of the institutional tranche.
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