Financial Services Association, November 14 (Reporter Guo Zishuo) Hongkong and Shanghai HSBC Bank Limited (hereinafter referred to as Hong Kong and Shanghai HSBC) announced yesterday that it has successfully issued 4.5 billion yuan of panda bonds in the mainland interbank bond market. This issue is part of the bank's recently approved Mainland RMB bond issuance plan totaling 10 billion yuan. It is also the second time since 2015 that it has issued panda bonds.

Hong Kong and Shanghai Banking Corporation was one of the first international commercial banks to issue panda bonds. The panda bonds issued this time are three-year, priced at 2.15%, and oversubscribed by 1.88 times. According to reports, the funds raised by Hong Kong and Shanghai HSBC will be used to meet the growing demand for RMB from offshore market corporate customers, while also supporting more RMB internationalization-related businesses.

Panda bonds refer to bonds denominated in RMB issued by overseas institutions within China. The issuers include four categories: foreign governments, international development agencies, financial institutions, and non-financial enterprises. A Financial Services Association reporter combed through and found that panda bonds issued by overseas financial institutions showed a trend of lower coupon interest rates and an increase in the scale of issuance.

According to Oriental Wealth Choice data, up to now, there are 38 overseas institutional bonds (financial institutions and international development institutions) out of unmatured bonds in the interbank market, with a bond balance of 105.5 billion yuan. However, the coupon interest rate for newly issued overseas institutional bonds collectively entered the word “2,” and the average coupon interest rate for newly issued panda bonds in 2024 was 2.326%. Of the surviving overseas institutional bonds, over 70% of overseas institutional bonds have coupon interest of less than 3%. Among them, the panda bonds issued by CCB Asia and ICBC Asia in the second half of the year hit a new low interest rate issued by financial institutions, with a coupon interest rate of 2.05%.

In terms of issuance scale, UOB and National Bank of Canada both successfully issued 5 billion yuan of panda bonds during the year, making the largest issuance scale of 3-year panda bonds by foreign financial institutions. Among them, UOB Bank of Singapore's bond has a term of 3 years, an issuance interest rate of 2.3%, and a subscription ratio of 1.73 times. The funds will be used to support the issuer's general banking business in the international market. The National Bank of Canada bond has a term of 2 years and an issuance interest rate of 2.13%. The National Bank of Canada stated that the net amount of capital raised will be used for the Group's general business. Based on the bank's existing cooperation intentions with customers, the funds raised in this bond will mainly be used to support and fund Canadian and international customers doing business in China or with Chinese counterparties.

According to previous statistics from Zheshang Bank FICC, the amount of panda bonds issued from 2021 to 2023 was 106.516 billion yuan, 85.07 billion yuan, and 154.45 billion yuan, respectively. According to HSBC estimates, 100 panda bonds have been issued from January to October 2024, and the total amount issued has reached 178 billion yuan. Regarding the rise in popularity of the panda bond market, the FICC of Zheshang Bank stated, “The combination of factors such as the gradual improvement of regulatory rules, the steady progress of RMB internationalization, and the willingness of overseas financial institutions to increase the allocation of RMB assets has provided strong support for the development of the panda bond market.”

A relevant person at HSBC also pointed out that since it was first issued in 2005, the panda bond market has continued to develop healthily. Both issuers and investors are becoming more diverse. As the high-quality development of the Chinese economy progresses, the use of RMB in cross-border trade and investment continues to increase, and demand for RMB assets continues to rise, thus promoting the development of the panda bond market.