Hong Kong Bond House
With a devotion to the development of a comprehensive fixed-income platform involving origination, sales, trading, transaction management, research and derivatives products, HSBC continued to prove its leadership in the Hong Kong dollar bond market. For the ninth year in a row, HSBC is IFR Asia’s Hong Kong Bond House of the Year.
It was a topsy-turvy year for fixed-income players. Despite the turbulence, HSBC put up a great performance in the Hong Kong bond market, particularly with regard to product variety and finding solutions for issuers’ and meeting investors’ needs in a challenging time.
In the period under review (November 16 2006 to November 15 2007), HSBC led 165 Hong Kong dollar deals raising HK$46.08bn (US$5.91bn), excluding self-led deals, for domestic and foreign issuers, according to Thomson Financial. That was equivalent to a 27.3% market share, well ahead of Standard Chartered Bank in second place with 18.3%.
Interestingly, from those figures, it seemed that HSBC had hardly been touched by the sub-prime debacle as it continued to provide borrowers with access to credit even during the turbulent period after July 26. Post-crisis, it raised US$670m for its clients in the offshore market and HK$5.33bn in the domestic market.
This year was also tough, given volatile interest rates. Issuance windows were increasingly tricky to find as a result of substantial widening credit spreads and rising investor caution. However, HSBC persistently provided reliable access to G3 currency debt markets for Hong Kong high-grade and high-yield issuers. Leading companies such as Wharf and Sun Hung Kai Properties hired HSBC for their first US dollar deals in the past 10 and 13 years, respectively.
On the high-yield side, a long series of Greater China-based medium-sized firms – such as China Fishery Group, Coastal Greenland, Hang Fung Gold, Lai Fung Holdings, and Li & Fung – made their debuts either in the international or the domestic market through HSBC, raising HK$16.78bn.
Also, HSBC was the top choice for four local banks – CITIC Ka Wah Bank, Hang Seng Bank, Liu Chong Hing Bank, and Wing Hang Bank – to enter the sophisticated G3 subordinated/hybrid bond market.
Nonetheless, HSBC maintained its position as the leading underwriter of foreign issuance, raising more than HK$29.83bn. While bringing back repeat issuers from overseas with benchmark deals for the likes of General Electric Capital, Korea Development Bank and Royal Bank of Canada, HSBC also strived to escort newcomers to the domestic scene, including the Province of Quebec and National Grid.
HSBC also led the first two groundbreaking renminbi bonds issued by mainland financial institutions in Hong Kong, namely a Rmb5bn tap by China Development Bank and a Rmb2bn deal from Export-Import Bank of China. To provide a viable secondary market, HSBC, along with all placement banks, committed to be market-makers on the deals to maintain a liquid and transparent pricing platform.
In addition to broadening the variety of renminbi investment options available to Hong Kong residents and expanding renminbi business in Hong Kong, of greater significance than the deal itself was HSBC’s behind-the-scenes work that enabled it to happen in the first place.
Now that the infrastructure for renminbi instruments has been established, the stage is set for the development of other renminbi products and for Hong Kong to establish itself firmly as an offshore renminbi hub. It also strengthens Hong Kong’s status as an international financial centre.
With that in mind, further triumphs came from the bank’s leading position in the trading of renminbi derivatives products. HSBC executed the first onshore renminbi forward rate agreements (FRAs) using Shibor and the first offshore renminbi non-deliverable FRA in Hong Kong.
HSBC also led the only Hong Kong dollar-denominated securitisation within the review period, the HK$2bn MBS from Hong Kong Mortgage (HKMC). It has been the sole arranger for three consecutive years in bookrunning HKMC’s Bauhinia MBS series.
Another remarkable achievement by HSBC was a massive consent-solicitation exercise for Kowloon-Canton Railway as part of its merger with Hong Kong MTR. The consent solicitation, a first for the Hong Kong high-grade sector, totalled US$2.28bn across six different series of issues and involved some 4,000 investors.
HSBC, with its unparalleled capacity to provide structuring advice – was clearly instrumental in making the rail merger happen.
Nethelie Wong