China’s offshore bond market continues to boom: Natixis

HONG KONG - The year-to-date Chinese offshore bond issuance till August 2017 has already surpassed 2016, and while monthly growth fell 56% in August, this is only due to seasonality, says global asset manager Natixis.

“Offshore USD bond issuance by Chinese corporates is still growing at a very rapid pace on a year-to-year basis,” it says.

“Within our industry classification, financials is the only group that was not affected by the traditional quiet pattern in August, with a steady pace of issuance even in August.

“This shows that the favourable interest spread for the offshore market has created the incentives for Chinese financials to issue in the offshore USD market.”

Natixis says the widened positive spread, favouring offshore issuance, is a consequence of higher onshore and lowers offshore funding costs.

“The offshore cost reduction is particularly obvious for high yield issuers, who have experienced a 2 8 bps decrease, the largest fall since February 2017.

“Given the tightened onshore liquidity conditions and the rapid RMB appreciation against the greenback, the offshore market is getting increasingly attractive for Chinese issuers.

“We would expect more issuance from financials or quasi-government agencies as their cost of funding is still clearly favorable offshore, especially for the latter.”  www.natixis.com (ATI).