HSBC launches London’s first offshore yuan bond

SHANGHAI/LONDON (Reuters): HSBC raised 2 billion yuan ($317 million) from the first international issue of a “dim sum” bond, hailed as a milestone in London’s efforts to become a centre for offshore yuan trading alongside Hong Kong.

Europe’s biggest bank launched the yuan-denominated bond to coincide with the launch by the City of London Corporation of a working group including five major banks to develop the city into a major centre for offshore yuan business.

“What’s changed is that there is an awareness in China of the need to deepen the international market for the RMB (renminbi), which the UK has tapped into,” said Nigel Pridmore, partner at law firm Linklaters.

“The process is off and running, it would be hard to put the genie back in the bottle now.”

The charm offensive was led by British finance minister George Osborne, who said London would complement Hong Kong as an offshore centre.

“It is the ambition of the British government to make London a western hub for the sector - with all the benefits that this will bring to our own economy,” Osborne said in a speech.

HSBC, a member of the new working group, will issue bonds worth 2 billion yuan, double the bank’s initial guidance on how much it planned to raise, and attracted demand for more than 4.25 billion yuan.

The three-year bond was mainly targeted at European investors and will pay annual interest of 3 percent.

HSBC has been a leader in the dim sum bond market in Hong Kong, which has seen explosive growth as China allows more avenues for yuan funds to flow across its borders and slowly internationalises its currency.

HSBC leads the league tables as a book runner for dim sum bonds in Hong Kong, having led 48 issues so far this year with proceeds of 13.9 billion yuan as of April 12, according to Thomson Reuters data.