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Korea primed to issue panda bonds

Nov 04,2015
Korea is poised to become the first sovereign to sell yuan-denominated debt in China, setting a benchmark for companies seeking to expand in the nation’s biggest export market.

The need for yuan funding is rising as Korean corporations boost investment in China, Song In Chang, the Finance Ministry’s director general, said in Seoul on Tuesday. The panda bonds will also allow Korea to diversify its foreign-currency issuance, he said.

China wants to increase the yuan’s global use and win its inclusion in the International Monetary Fund’s basket of reserve currencies. It agreed at an Oct. 31 meeting in Seoul between Korean Finance Minister Choi Kyung-hwan and Xu Shaoshi, chairman of the National Development and Reform Commission of China, to back the bond plan as well as direct trading in yuan- won in Shanghai. The Canadian province of British Columbia also said last month it’s in discussions to sell panda debt on the Chinese mainland as it seeks closer business ties with the world’s second-largest economy.

“Local investors have been interested in yuan-denominated bonds, but there were no credible benchmarks,” said Lee Jae-hyung, a fixed-income strategist at Yuanta Securities Korea, in Seoul. A sale by Korea’s government “will be a catalyst for issuance by local companies,” he said.

The Finance Ministry has hired Bank of Communications, Citigroup, Goldman Sachs Group, HSBC Holdings, Samsung Securities and Standard Chartered for a foreign- currency bond sale, people familiar with the matter said last week, asking not to be identified because the details are private. The first priority is a panda bond, which may be issued as early as this year, they said. Bloomberg


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