"Honey of A, arsenic of B."
-- Yishu "Mandala"
The hot issuance of Chinese dollar bonds is a certainty. Zhitong Financial APP learned that the Chinese dollar bond market reached its maturity peak in 2019, with maturities of US $37.8 billion, US $47.6 billion, US $36.3 billion and US $42.2 billion respectively in the first four quarters of 2019, with a total maturity / redemption volume of US $163.9 billion for the whole year.
Based on this, Chinese dollar bond issuance entered an accelerated phase in April 2019. In that month, a total of 290 US dollar bonds were issued, with a total amount of US $38.2 billion, up 31.9% from the same period last year and 37.4% from the previous month. Excluding bonds issued by banks, 52 US dollar bonds were issued, with a total issued amount of US $21.9 billion, up 43% from the same period last year and 52.1% from the previous month. The momentum in April is significantly different from the 5% month-on-month growth from January to March.
But to tell you the truth, the issuance of US dollar debt financing is not the same as before.
Today's Chinese dollar debt is not what it used to be.
Low cost and high efficiency used to be an important label for Chinese dollar debt.Zhitong Financial APP learned that, first of all, it is also overseas financing, compared with the cumbersome process of overseas public listing, issuing US dollar bonds is much easier and faster. As the issuance of US dollar bonds does not need approval, it only needs to disclose information in accordance with the relevant regulations, which is conducive to bond financiers to quickly obtain funds from the capital market.
In addition, due to the previous low interest environment abroad, the coupon rate of bonds issued has been reduced, and the appreciation of RMB in previous years has further reduced the cost of overseas financing. At the same time, for multinational enterprises, issuing US dollar bonds to support their overseas business exempts some foreign exchange exchange procedures and reduces the risk of exchange rate fluctuations, so many Chinese companies choose to issue US dollar bonds.
Now, however, the cost of financing dollar debt is clearly rising. Zhitong Financial APP learned that in terms of issuing interest rates, 2016 was the watershed, following an overall downward trend in Chinese dollar bond issuance rates, with an average issuance rate of 2.39 per cent in the fourth quarter of 15 years. After 2016, due to the continuous rise in US bond yields and the superimposed issuance of Chinese dollar bonds, the sharp increase in supply pushed up the issuing interest rate, which rose as high as 6.73% from January to April 2019.
Chinese dollar bond issuance accelerated in April 2019, but only in three sectors.Zhitong Financial APP learned that the real estate industry accounts for more than 60% of the top 30 issuers, and most of the top 15 companies are real estate enterprises, followed by banking and software and service industries.
Among them, the software industry, which reached $6.78 billion in April, is basically supported by Tencent's monthly issue of $6 billion in April. And excluding banking and financial services in April, the average interest rate on Chinese dollar bond issuance was 7.8%, up 0.9 percentage points from March.
For the most active real estate industry, although the average interest rate of issuing bonds is on the rise, the trend of interest rates on dollar bonds of major real estate enterprises is very different.
Several families are happy, several families are sad.
In the face of US dollar debt, the gap between real estate enterprises and real estate enterprises is so big.As of early May 2019, real estate companies issued $38.185 billion of US dollar bonds, 72.85 per cent of the total for 2018, according to Zhitong Financial APP. Evergrande (03333), Country Garden Holdings (02007), China Real Estate (00688), Greenland (00337), Rongchuang (01918) and Vanke (02202) occupy the top six. Evergrande ranked first with a stock of US $18.724 billion in US dollar debt, followed by Country Garden Holdings and China Shipping Real Estate, with US $8.45 billion and US $7 billion respectively, and Greenland, Sunac and Vanke each exceeded US $5 billion.
Overall, weighted coupons vary widely among housing companies in 2019, with most of them exceeding 7%.Zhitong Financial APP learned that the premium leading real estate companies Poly and Vanke plus coupons are in the range of 3.8 per cent, Cosco's weighted coupons are 5.25 per cent, Shimao (00813), Agile (03383) and Metro plus coupons are in the 6 per cent range, and the other 22 real estate companies are all more than 7 per cent. The weighted coupon of contemporary home ownership (01107) is as high as 14.28%, the weighted coupon of Oceanwide is 12%, and the weighted coupon of South China City (01668), pattern year (01777), Rongxin (03301) and Sunshine City is about 10.5%. 12%.
Among them, the financing cost of dollar debt of a large number of real estate companies is falling sharply. Evergrande's dollar debt financing has improved most obviously, with weighted coupons down more than 3 percentage points from 2018, and the company has significantly increased its financing from $3 billion to $6.7 billion. Zhengrong (06158), Agile and Hejing Pacific (01813) also reduced their coupons by more than 1 percentage point, while Zhengrong, Huaxia Happiness and Sunac all issued more US dollar bonds as of early May.
There is also a large number of real estate companies dollar debt financing costs are rising. For example, the weighted coupon of contemporary home ownership has increased by as much as 6% compared with 2018, and Rongxin has also increased by more than 2%. R & F (02777), Yuzhou (01628), Sunshine City and Xuhui (00884) float in the range of 0.95 to 1.25.
However, companies with lower dollar debt costs do not necessarily increase the scale of financing, and housing companies with significantly higher financing costs are not all downsizing.Zhitong Financial APP learned that high-quality real estate companies such as Vanke and Poly can easily switch financing channels at home and abroad and are in no hurry to issue too many US dollar bonds. While enterprises such as Sunshine City and contemporary home buyers, which are facing the pressure of maturity and repayment of US dollar debt, choose the latter among domestic bonds with stricter bond issuance conditions and US dollar bonds with relatively loose conditions.
To sum up, in the face of current dollar debts, enterprises such as Vanke and Poly can do easy freehand brushwork, while housing enterprises such as Evergrande and Country Garden Holdings can make the best use of things; and for housing enterprises with follow-up financing problems, now issuing high-cost US dollar debt, or used for cash flow first aid, or used to replace old debts, the considerations and tradeoffs behind this, I am afraid, is not so easy.